RESEARCH REAL ESTATE HIGHLIGHTS 1ST HALF 2017 KUALA LUMPUR PENANG JOHOR BAHRU KOTA KINABALU HIGHLIGHTS KUALA LUMPUR HIGH END CONDOMINIUM MARKET Subdued high-end condominium market with developers scaling ECONOMIC INDICATORS 44.3%). Meanwhile, 1Q2017 also saw a back on new property launches marginal increase in the total outstanding / amid continued weak demand. Malaysia’s economy rebounded in non-performing loans in the housing sector 1Q2017 with Gross Domestic Product to RM5.54 billion (4Q2016: RM5.41 billion). (GDP) expanding at 5.6% (4Q2016: With potential purchasers and 4.5%), driven mainly by higher private investors waiting on the side- expenditure. For 2017, the country’s GDP lines, developers continue to growth forecast range between 4.3% and tweak their marketing strategies 4.8%, supported by gradual improvement to sustain earnings through in the global economy and domestic “stock clearing” of completed demand. and on-going projects. Headline inflation for 1Q2017 was higher at 4.3% (4Q2016: 1.7%), driven mainly Limited completions of high- by high transportation cost. The annual end condominiums / residences inflation for 2017 is expected to be in the during the review period. region of 3.0% to 4.0% (2016: 2.1%). The labour market condition for 1Q2017 Secondary pricing in selected remained stable, with the unemployment locations remained flat while rate of 3.5% (4Q2016: 3.5%). rentals continued to be under To remain accommodative to economic pressure. activity and to support domestic demand, Bank Negara Malaysia (BNM) continued China’s capital control impact to maintain the Overnight Policy Rate projects targeting buyers from (OPR) at 3.0%. mainland China. As for residential property purchase, the ratio of approvals to applications for The Sentral Residences 1Q2017 was lower at 40.4% (4Q2016: FIGURE 1 Projection of Cumulative Supply for High End Condominiums / Residences 2013 - 2H2017(f) Note: (1) (F) = Forecast (2) The locality of Bangsar includes Bangsar, Bangsar South, KL Sentral, KL Eco City and Pantai Sentral Park Source: Knight Frank Research 2 REAL ESTATE HIGHLIGHTS MALAYSIA projects which made their wave since TABLE 1 2013. They are The Ritz-Carlton Completion of High End Condominiums / Residences in 1H2017 Residences (288 units); Four Seasons Place (242 units); Tribeca Bukit Bintang (318 units); The Ruma Residences (199 units) and The Establishment (521 units). Source: Knight Frank Research SUPPLY & DEMAND lower than the previous quarter (4Q2016: 1,420 units valued at RM1.04 billion). During the period under review, the high-end condominium market in Kuala The cumulative supply of high-end Lumpur remained subdued with lesser condominiums / residences stood at market activity as potential buyers and 47,380 units in 1H2017 following the investors continued to adopt the ‘wait- completion of three projects contributing and-see’ approach. a total of 1,333 units. They are The Sentral Residences (752 units); Arcoris Amid weak market sentiment, Wilayah Mont’ Kiara (331 units) and 28 Dutamas Persekutuan Kuala Lumpur (WPKL) (250 units). recorded lower volume and value of transactions in the condominium By the second half of 2017, another / apartment segment with 1,247 eight projects totalling 2,979 units are transacted units valued at RM975.88 scheduled for completion, five of which million in 1Q2017, 12.2% and 5.9% comprise of hotel branded / managed The Ritz-Carlton Residences These developments, leveraging on TABLE 2 international and regional class hotel Notable Launches in 1H2017 brands, continue to raise the standard of luxury living in Kuala Lumpur. They will join the 2016 maiden completions SR = Serviced Residence SA = Serviced Apartment Four Seasons Place Source: Knight Frank Research 3 of branded residences in Kuala Lumpur, sizing, floor level and other factors. locations such as those along the rail namely, the 441 private residences at transportation routes for transit oriented In the secondary market, transacted Pavilion Banyan Tree Signatures and developments (TOD) and affordable cum prices of smaller condominium / the 160-unit The Residences at The St. mass housing projects. apartment units sized below 800 sq ft in Regis Kuala Lumpur. selected schemes such as Marc Serviced The popularity of dual-key units, offering There were noticeably less launches of Residence and ViPod Residences in additional rental income, and smaller high-end condominiums / residences KL City, continued to remain resilient at sized units continues as affordability during the review period. RM1,600 per sq ft to RM1,800 per sq ft. remains a key issue in the domestic housing market. Notable launches in 1H2017 include the Despite the soft market, asking prices Serviced Residences at KL Metropolis’s continue to remain relatively stable Moving forward, the recent rebound in MET 1; Isola @ KLCC; and Dorsett although vendors are more flexible in the country’s economy coupled with Residences Sri Hartamas (Phase 1) negotiations. strengthening of the local currency and which was previously marketed as stable employment market amongst other Hermitage. OUTLOOK positive developments, offer ray of hope for recovery in the high-end condominium PRICES AND RENTALS China’s recent regulatory changes over market. Malaysia remains as an attractive international monetary transfers continue investment destination in the region with During the review period, there was no to impact projects targeting buyers sign of recovery in the rental market. from mainland China. This is expected its stable property market and relative lower entry prices that continue to offer Asking rentals in selected older schemes to further dampen the already weak reasonable returns. in the localities of KL City, Damansara high-end condominium market which is Heights, Bangsar and Mont’ Kiara remain undergoing self-correction amid widening under pressure. gap between supply and demand. Amid the challenging property market Newly launched projects are priced from environment, developers continue to RM1,000 per sq ft onwards. In KL Fringe, tweak their marketing strategies to the serviced residences at MET 1 KL sustain earnings through ‘stock clearing’ Metropolis are priced from RM1,000 per of completed and on-going projects. sq ft to RM1,100 per sq ft on average while in KL City, the pricing for Isola @ Developers are also seizing opportunities KLCC range from RM1,500 per sq ft to in this soft market to increase their RM1,600 per sq ft depending on unit land banks in strategic Klang Valley TABLE 3 Average Asking Prices and Rentals of Existing High End Condominiums *Excludes Binjai on the Park but includes Pavilion Residences **Excludes Seri Hening ***Includes Twins @ Damansara Heights ****Excludes Verve Suites which comprise mainly fully furnished small units Source: Knight Frank Research 4 REAL ESTATE HIGHLIGHTS MALAYSIA HIGHLIGHTS KUALA LUMPUR & BEYOND KUALA LUMPUR (SELANGOR) The quality of office stock for both Kuala Lumpur and Beyond OFFICE MARKETS Kuala Lumpur (Selangor) continues to be upgraded with MARKET INDICATIONS (Tower 1). the completion of more Grade A Menara Public Bank 2, a 40-storey newly and dual-compliant (MSC+GBI) The Kuala Lumpur and Beyond Kuala completed Grade A office tower, at Jalan buildings that caters to the Lumpur (Selangor) office markets continue Raja Chulan in the Golden Triangle of requirements of large corporates to remain lacklustre with demand lagging Kuala Lumpur, offers a net lettable area and multinational companies. behind supply. (NLA) of 420,000 sq ft. The green building SUPPLY with both LEED Platinum and GBI Gold Refurbishment and certifications features dual entrances, As of 1H2017, the cumulative supply redevelopment opportunities a banking hall and a quadruple-volume of purpose-built office space in Kuala abound for well-located older and grand lobby. It has typical floor plate of Lumpur and Beyond Kuala Lumpur lower grade office stock. about 12,500 sq ft. (Selangor) stood at circa 99.0 million sq ft. Located in the established township of There were eight completions during the The scheduled full completion of Taman Tun Dr Ismail, Menara Ken @ review period, adding some 2.63 million the Sungai Buloh-Kajang MRT TTDI is a brand new 13-storey Grade A sq ft of space to the existing stock. Line (MRT Line 1), linking to KL office tower with a NLA of 300,000 sq Sentral, Malaysia’s largest transit In KL City, the cumulative supply ft. The MSC compliant tower, certified hub by July, is expected to boost increased to 51.4 million sq ft following with LEED Platinum, BCA Green Mark demand for offices in established completion of Menara Public Bank 2 while Platinum and GreenRE Platinum, offers and upcoming decentralised in KL Fringe, the completion of Menara typical floor plate of 25,000 sq ft. Three office locations. Ken @ TTDI, The Pillars @ KL Eco City floors of the building are designated for and Menara SUEZCAP 1, brought the food & beverages (F&B) outlets, ballroom, cumulative supply to 27.3 million sq ft. function rooms, a performing arts theatre In Beyond KL (Selangor), the cumulative and arts gallery while the recreational supply increased to 20.2 million sq ft facilities at the rooftop include a following completion of SunGeo Tower, gymnasium, swimming pool and sky bar. Block G and Block H of Empire City SunGeo Tower forms part of Sunway Damansara and Mercu Mustapha Kamal Geo integrated development that also comprises retail shops, office suites and residential components. The 17-storey Grade A tower comprises Menara Public Bank 2 Block H of Empire City Damansara 5 14 levels of office space, three levels estimated GDV of RM420 million, the and weak demand from its traditional of retail space and sky gym at rooftop. proposed development will comprise a occupiers in the Oil & Gas (O&G) and SunGeo Tower, which comes with MSC car showroom centre and four blocks banking sectors, especially in KL City, Malaysia Cybercentre status, is currently of signature office towers. Located on a continued to impact the office market.