{"id":2198,"date":"2019-03-01T09:35:15","date_gmt":"2019-03-01T09:35:15","guid":{"rendered":"http:\/\/pgawards.wpengine.com\/?p=2198"},"modified":"2021-06-04T14:16:12","modified_gmt":"2021-06-04T07:16:12","slug":"onwards-and-upwards-malaysias-residential-sector-soaring-out-of-the-doldrums","status":"publish","type":"post","link":"https:\/\/www.asiapropertyawards.com\/en\/onwards-and-upwards-malaysias-residential-sector-soaring-out-of-the-doldrums\/","title":{"rendered":"Onwards and upwards: Malaysia’s residential sector soaring out of the doldrums"},"content":{"rendered":"
So many new hotels have opened in Kuala Lumpur in the past year that one wonders if the Olympics are coming to town\u2014that is, the six-hundred thread-count Olympics. Four Seasons, Banyan Tree, W, Alila, The RuMa, and Pavilion all entered the arena in 2018, with the massive EQ imminent, and Park Hyatt coming in 2020. There\u2019s also the barrage of badass bars and amazing restaurants hanging up shingles across the city.<\/p>\n
KL was always an easy place to visit, a smart place to shop, a great place to eat, and a fun place to party, but caught between hyper-orderly Singapore and byzantine Bangkok, it always seemed a little… bland. Times are changing, however, and it\u2019s largely driven by three things.<\/p>\n
First there\u2019s the cool kids, who are giving their regional peers a run for their money in terms of mixology, culinary innovations, and generally creating a scene. Second, the developers whose visions for projects are finally coming to fruition no matter hell, highwater, or\u2014the third reason\u2014an unsure and fascinating political climate.<\/p>\n
No, you certainly can\u2019t call KL bland these days.<\/p>\n
In May, the 92-year-old former long-term Prime Minister Mahathir Mohamad ousted his former protege Najib Razak, who left office under a cloud of corruption and was recently charged with new graft allegations for allegedly looting 1Malaysian Development Berhad, a state fund.<\/p>\n
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EVERYBODY IS EXTREMELY CONFIDENT THAT STEPPING UP FROM KLEPTOCRACY TO TECHNOCRACY WILL ONLY BRING GOOD TO MALAYSIA. HOWEVER, CHANGES TAKE TIME TO BE COMPLETED AND THE RESIDENTIAL MARKET, IN GENERAL, IS STILL WAITING TO SEE THE RESULTS OF ALL THE NEW POLICIES<\/div>\n<\/blockquote>\n
Despite the international controversies swirling, Najib ran a tight race and his (and formerly Mahathir\u2019s before he joined the opposition) party had held power since they country\u2019s independence so May\u2019s election results caught everybody by surprise.<\/p>\n
\u201cI would say that all Malaysians are still trying to adjust themselves to the new direction,\u201d says Dr. Daniele Gambero, CEO of REI group of companies. \u201cThe first thing to be said is that everybody is extremely confident that stepping up from kleptocracy to technocracy will only bring good to Malaysia. However, changes take time to be completed and the market, in general, is still waiting to see the results of all the new policies.\u201d<\/p>\n
These include a new five percent Real Property Gains (RPG) tax after five years for locals and an additional five percent RPG tax for foreigners; and an increase in the stamp duty on the transfer of property valued above MYR1 million (USD242,245), from three to four percent, in the government\u2019s Budget 2019.<\/p>\nThe election of Mahathir Bin Mohamad in 2018 has helped restore confidence to the housing market. Nevertheless, the impact of new policies has yet to be seen. Djohan Shahrin\/Shutterstock<\/figcaption><\/figure>\n
Buoyancy, though, in Budget 2019, comes in the form of the waiver of the stamp duty, until December 2020, for first-time homebuyers on the instrument of transfer and loan agreement for residences worth up to MYR300,000. The same is also waived for six months for first-time buyers purchasing homes worth MYR300,000 to MYR1 million. Such exemptions and initiatives, states Knight Frank Malaysia in their Real Estate Highlights 2nd Half 2018, \u201care expected to kick-start the housing market moving into 2019 and beyond.\u201d<\/p>\n
The wheels are already turning: Knight Frank saw more launches of luxury residential developments in KL in 2H2018 than in the first half of the year. That\u2019s good news as the country has been holding its breath for a while now. The third and fourth quarters have seen a slow market, with growth at 4.4 percent in Q3 2018 down a smidge from 4.5 percent in Q2. \u201cAdding further tension to the above is the ongoing China-U.S. trade war, which sees Malaysia right in the middle,\u201d Gambero says.<\/p>\n
According to Knight Frank\u2019s research, by end of 2018, the cumulative supply of high-end condos and residences in the KL area totalled 53,033\u2014thanks to completions in the second half of such big names as The Ruma Residences, Pavilion Suites, Premium Residences @KL Gateway and the massive Dorsett Residences Sri Hartamas. Another 931 are expected to come on line by the end of first quarter this year.<\/p>\n
Where the luxury market is most concentrated\u2014KL, Penang, and Johor Bahru\u2014supply is far exceeding demand, especially with overseas developers simultaneously launching huge quantities of luxurious residential units. Whilst there have been \u201cquite substantial support from national buyers\u201d\u2014Knight Frank\u2019s Wealth Report 2018 states nearly half of Malaysia\u2019s ultra-high net-worth individuals (those personally worth more than USD50 million) plan to buy an investment property in-country in the next few years\u2014Gambero asserts that attracting, rather than scaring, foreign investors must be a major priority.<\/p>\nWhile other markets in Malaysia have their appeal, the blend of commercial and cultural flavours in the capital Kuala Lumpur is hard for many investors to resist. Migel\/Shutterstock<\/figcaption><\/figure>\n
\u201cLocal developers were betting on the possibility of incoming interest from overseas buyers, which didn\u2019t happen as much as expected,\u201d Gambero says. Currently, less than one percent of property is owned by foreigners, according to the Ministry of Housing. \u201cNumbers are clearly saying that it might be taking years for the market to fully absorb the supply.\u201d<\/p>\n
Thus, the dip in asking prices reported in 3Q2018 came as little surprise. \u201cDevelopers are coming to the tipping point of accepting lower profits or maybe minimal losses in order to just dispose of as many as possible unsold units. It\u2019s all about cash flow,\u201d says Gambero.<\/p>\n
While the upscale residential resale market was generally flat, Gambero advises the smart play would be to sit on one\u2019s holdings. \u201cCapital gains, looked at as a long-term game, say five to seven years, is still showing a good potential to increase. Areas such as KL, Greater KL, Penang, and Kota Kinabalu might be seeing three- to four-fold gain.\u201d<\/p>\nKota Kinabalu, the capital of the state of Sabah in east Malaysia, is seen as one of the nation\u2019s rising stars for development. hkhtt hj\/Shutterstock<\/figcaption><\/figure>\n
Another remedy to the sales lull would be to tweak the price-size-unit ratios. According to Knight Frank, \u201cschemes launched recently [in KL] are observed to have higher composition of units with smaller built-up area below 1,000 sqf resulting in lower quantum pricing, but higher price on a per sqf basis.\u201d It\u2019s in this game where the bad boys are making a play to dethrone Four Seasons Place Kuala Lumpur. Currently the record-holder for raking it in, a Four Seasons residential duplex (there are 262 units) is estimated at MYR21million, or MYR3,300 per sqf.<\/p>\n
Not to be outdone, KSK Land launched Tower B of Yoo8 @ 8 Conlay, the Kempinski branded residences, with starting prices of MYR3,260 per sqf. Pavilion Suites adds to the competition, putting up some pretty impressive per quantum numbers: condos priced from MYR2.2 million to MYR5.9 million, and penthouses going for MYR27.98 million. When your sky-scraping city-centre condo comes with special privileges at couture, jewellery and luxury stores in the partner retail mecca, not to mention access to private planes, yachts and limos arranged by a dedicated concierge, it isn\u2019t surprising Pavilion sold most of its units ages ago in a private viewing.<\/p>\n
Beyond the diamond-encrusted market, another source of hope is the multinational corporation segment. With KL ranked as Southeast Asia\u2019s second most liveable city by the Economist Intelligence Unit, InvestKL CEO Datuk Zainal Amanshah, in an interview with NST Property last year, points to great potential for companies with money to spend on housing. He said large MNCs like to keep things simple, with self-contained developments that promote the live-work-play hat-trick, with international schools, integrated retail, office and residential components, and access to good transportation infrastructure such as mass transit. \u201cMNCs appreciate the affordability, good connectivity, and well-designed mixed-use developments, which will be Kuala Lumpur\u2019s trump card as it strives to be one of the leading cities in the ASEAN region,\u201d he said.<\/p>\n
Whether they\u2019re going to roll out the red carpet, or just put the kettle on, it might be about time the KL residential market follows hospitality in getting prepped for those guests.<\/p>\n
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