The area around the city centre is generally popular with the well-to-do due to its prestigious address, writes PAULINE NG

HOWEVER much Kuala Lumpur may have changed over the years, the addresses sought by the elite and well-to-do remain much the same.

The area around the Kuala Lumpur city centre, Damansara Heights, U-Thant-Ampang, Kenny Hills, Bangsar and in recent years, Mont Kiara - a high-rise luxury condominium enclave on the city fringe - invariably top the list of Kuala Lumpur real estate.

‘These areas are generally popular with investors and occupiers due to their prestigious addresses, good
accessibility, and proximity to a wide range of commercial activity,’ observed Jones Lang Wooton executive director Malathi Thevendran.

A property laggard, Malaysia managed to draw foreign investors over the past two to three years with more investor-friendly policies such as the exemption of real property gains tax, and the relaxation of approvals from the foreign investment committee for residential units worth more than RM250,000 (S$103,700). At the peak of interest in 2006-2007, they accounted for up to a third of new high-end residential apartments sold in the KL city centre area.

As long as foreigners meet the ‘value criteria’ there are no restrictions on the number of residential units they can acquire for either leasehold or freehold tenures. And unlike Singapore, there are no restrictions on foreigners buying landed properties in Malaysia, observed Regroup Associates executive chairman Christopher Boyd. Moreover, there are no inheritance taxes, and buyers can access local bank loans and offset rental income against interest payments.

Ms Thevandran said the only restrictions on foreign buyers are low and medium cost residential units, properties built on Malay reserve land or those allocated to Bumiputras under Bumiputra quotas, agricultural land developed on the basis of the homestead concept, and properties gazetted under the National Heritage Act 2005.

In Mr Boyd’s view: ‘Malaysia must be one of the most inexpensive places in South-east Asia, and the quality of life is excellent.’ Korean interest has been particularly strong this year, he said, with many retiring in the country under the Malaysia My Second Home scheme.

Multinational companies and expatriates make up most of the tenant pool. But the expat pool is not expanding fast enough to keep pace with growing supply, realtors say. At the same time, housing allowances are shrinking. In the KLCC area, for example, the estimated 8,000-plus luxury serviced residences are expected to swell to over 15,000 units by end-2010, according to projections.

CH Williams Talhar & Wong managing director Goh Tian Sui said an important consideration is whether one buys to stay or rent. If it is the latter, one will need to know the targeted tenants and their specific requirements and look for units in areas that have the desired facilities. He cites Desa Park City - a new residential gated community - whose townhouses and commercial surroundings are now proving popular with the expat population. In his opinion, over the next few years there will be far more large units - those bigger than 2,500 sq ft - than the market wants.

‘Lettability’ is also going to become an increasingly important issue because of rising competition in the rental market.

‘Properties with good lettability are those that are managed well. Buyers should do all they can to gauge the future quality of management which will have direct impact on value,’ Mr Boyd advised. ‘It is important to ascertain what the developer’s plans are to manage the completed building, and what his track record is in this field.’

Don’t expect to fetch a rental of more than RM25,000 per month as ‘few expats have a budget higher than that’, he said, pegging rental yields at 3-5 per cent. Besides the economic slowdown, current negatives for the local market include political uncertainty, a weakening local currency and the possibility of an interest rate hike.

Because of that, prices are expected to ease, but the few developers that have boldly proceeded with planned launches have increased prices by 10 to 30 per cent owing to heftier building costs.

Still, Mr Goh thinks now is a good time for prospective buyers to start looking ‘because sellers are more motivated to sell and are more realistic about prices’.

Bargains could emerge over the next year in the mid and lower market segments, Mr Boyd said, adding: ‘However, the top end does not appear to be affected by the sub-prime crisis in the West and cost push (inflation) is likely to raise values.

‘It is unlikely that anything in the ‘luxury’ range can now be built to sell for less than RM750 per sq ft as an absolute minimum, and since costs are rising, this is probably as good a time as any to buy.’

Premium branded residences will soon make their mark in Kuala Lumpur - the first being KLCC’s The Binjai, followed by upcoming ones such as The Four Seasons, Millenium Residences and St Regis.

Unconfirmed market talk has it that units at The Binjai were recently transacted at RM3,000 psf - about double the average going rate for high-end properties around the KLCC area. Prices vary considerably, however, and some developments are selling for less than RM1,000 psf.

According to Ms Thevendran, the market continues to be resilient with developers of new prime launches recording good take-up rates. ‘However, an over-supply situation is materialising and unless you are buying the best quality prime real estate, our view is to wait a few months for a clearer direction on whether prices will hold up in the short term.

‘In the longer term, coming from a regionally lower price base, together with increasingly limited land stock in the KLCC area, urban population growth and a slowdown in condominium launches after 2009, investment prospects for high-end condos remain good, provided a significant number of units for sale do not flood the market at once.’

Source : Business Times - 26 Sep 2008

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