Powered by

Powered by

Kuala Lumpur

Residential Market Update January 2019

The formation of a new government following ’s recent general election is already having a positive impact Economic indicators on the economy. Nominal quarterly GDP growth for Malaysia, Malaysia-wide unemployment, inflation and the overnight policy rate Consumer sentiment has been improving following the three month tax holiday, with the introduction of the GDP Quarter-on- Malaysia Overnight zero-rating of the Goods and Services Tax (GST), effective 1.7% Quarter Growth 3.25% Policy Rate from 1st June 2018, and the re-introduction of the Sales and Q2 2018 September 2018 Services Tax (SST) on 1st September 2018. This has been reinforced by strong employment and a low inflation rate; in Unemployment Rate Inflation Rate August 2018, unemployment levels stood at 3.4% and the 3.4% August 2018 0.2% August 2018 inflation rate was low at 0.2%.

In the second quarter of 2018, the Business Conditions Index Nominal GDP growth Unemployment Rate Inflation Rate 6% (BCI), published by the Malaysian Institute of Economic Research, hit its highest level for the past 13 quarters at 5% 116.3 points. In addition, the continuing development of Kuala 4% Lumpur’s new financial district, , looks set 3% to further boost Malaysia’s growing financial services sector. 2%

Keeping pace with rapid urbanisation is the development 1% progress of transport infrastructure in Greater 0% (GKL). The completed and on-going Light Rail Transit (LRT) and Mass Rapid Transit (MRT) lines are enhancing mobility and -1% connectivity within the region, and helping to transform GKL -2% into a sustainable and liveable metropolis. -3%

This positive sentiment is also reflected in the movement of -4% Malaysian Ringgit. At the beginning of October 2018, it was -5% trading at $0.24, which is up from $0.22 in October 2017. 2017 2015 2014 2016 2018

Source: Knight Frank Research, Macrobond, Department of Statistics Malaysia, Central Bank of Malaysia 2

Residential Market Kuala Lumpur Sales Market Insight Current conditions in the Kuala Lumpur sales market.

Despite recent tax changes, the GST products, the market continues to self-correct exemption of the housing sector has meant in certain locations. With affordability the key 4 that Kuala Lumpur’s property market has issue in the domestic housing market, both the Years since there has been positive double- remained relatively stable. public and private sectors (developers) are digit price movement in Kuala Lumpur focusing on building affordable and mass Central Region The House Price Index for the capital’s Central housing within the Region has continued its upward trend, albeit region, supported by lower land costs and at a slowing pace. In the first quarter of 2017, improved connectivity. Investments and the index’s growth rate stood at 8.9%; by the progress in road and rail infrastructure continue first quarter of 2018, this had dropped to its to promote townships in the suburbs and 3.3% lowest rate since 2013 at just 2.1%. This may in transit oriented developments (TOD) along Decline in sales in the year to March 2018 in part be due to the ‘wait and see’ approach the rail lines. Kuala Lumpur Central Region adopted by some potential purchasers and investors prior to the election. Kuala Lumpur’s prime housing market, concentrated in the Kuala Lumpur Central A slew of cooling measures implemented to Region, offers great investment opportunities. 2.1% curb speculative activities since 2012, have Supported by the Malaysian My Second Home Improvement of house price index in Kuala stabilised the housing market. The double-digit Programme, its property prices remain among Lumpur Central Region in the year to price growth seen in Kuala Lumpur’s Central the cheapest in Asia. March 2018 Region in 2013 has moderated over the past five years, with residential market transaction levels in 2017 falling to below 3,000 units per quarter.

Amid the growing gap between housing affordability and the available residential

Residential prices Residential transactions Household growth The annual percentage change in House Price Index The number of residential transactions The annual increase in number of households in Kuala Lumpur Central Region in Kuala Lumpur in Kuala Lumpur

20% 5,000 15,000

12,000 15%

4,000

9,000

10%

6,000 3,000

5% 3,000

0% 2,000 0 2017 2013 2015 2014 2016 Q1 2017 Q1 2015 Q1 2013 Q1 2014 Q1 2016 Q1 2018 Q1 2017 Q1 2015 Q1 2013 Q1 2014 Q1 2016 Q1 2018 Q3 2017 Q3 2015 Q3 2013 Q2 2017 Q4 2017 Q2 2015 Q2 2013 Q4 2015 Q4 2013 Q3 2014 Q3 2016 Q2 2014 Q2 2016 Q4 2014 Q4 2016 Q3 2017 Q3 2015 Q3 2013 Q2 2017 Q4 2017 Q2 2015 Q2 2013 Q4 2015 Q4 2013 Q3 2014 Q3 2016 Q2 2014 Q2 2016 Q4 2014 Q4 2016

Source: Knight Frank Research, Source: Knight Frank Research, Source: Knight Frank Research, Department of Statistics Malaysia National Property Information Centre (NAPIC) National Property Information Centre (NAPIC) Residential Market Kuala Lumpur Rental Market Insight A look at the recent conditions in the Kuala Lumpur rental market.

The performance of the Kuala Lumpur amid a tight leasing environment putting Central Region rental market in recent years further pressure on overall rents. As the gap 11.4% is better understood in context of its supply between supply and demand widens, tenants Annual increase in the number of listings in and demand situation. continue to have the upper hand when the first quarter of 2018 negotiating rents and tenancy agreements, The residential rental market, in particular be it for a new lease or to renew one. Despite for the high-end high-rise segment in the this gap widening, rental prices in Kuala city, continues to be tenant-led and heavily Lumpur have increased by 2% in the year 2% impacted by oil prices falling since 2014. to March 2018. Increase in rental prices in the year to The overall number of listings for the residential The 2018 Budget announced a 50% tax March 2018 segment has been increasing since the second exemption for Malaysian residents, extending quarter of 2017. Many of the projects launched to up to three years and covering rental income prior to the abolishment of the Developers not exceeding RM2,000 per month, per Interest Bearing Scheme (DIBS), announced property. This tax relief is expected to boost the under Budget 2014, were completed in the late rental market for properties commanding rents The residential rental market continued to 2016/2017 period. This inevitably led to an below the threshold, and will also help to be tenant-led due to a mismatch in supply increase in the cumulative residential supply, support the housing needs of lower income and demand particularly the high-rise stratified units. groups who have been priced out of the Central Region housing market. Since making its way into the market in early 2009, the DIBS created an opportunity for property speculation. Its abolishment, coupled with the impact of the cooling measures, has led to a slowdown in overall market activities, with many completed units available for rent

Rents Rental leases Financial & business services The annual percentage change in rents in Kuala The annual percentage change in number of listings on Annual change in employment in financial & Lumpur Central Region iProperty in Kuala Lumpur business services in Kuala Lumpur

12% 35% 80,000

10% 30% 70,000 8% 25% 6% 60,000 20% 4% 15% 50,000 2% 10% 0% 40,000 5% -2% 30,000 0% -4%

-6% -5% 20,000

-8% -10% 10,000 -10% -15%

-12% -20% 0 2017 2013 2015 2014 2016 Q1 2017 Q1 2015 Q1 2013 Q1 2014 Q1 2016 Q1 2018 Q3 2017 Q3 2015 Q3 2013 Q2 2017 Q4 2017 Q2 2015 Q2 2013 Q4 2015 Q4 2013 Q3 2014 Q3 2016 Q2 2014 Q2 2016 Q4 2014 Q4 2016 Q1 2017 Q1 2016 Q1 2018 Q3 2017 Q3 2015 Q2 2017 Q4 2017 Q4 2015 Q3 2016 Q2 2016 Q4 2016

Source: Knight Frank Research Source: Knight Frank Research, iProperty (Malaysia’s largest Source: Knight Frank Research, Macrobond, Oxford Economics property website) 4

Local Performance Local Residential Market Performance A look at market performance in the prime residential area over the past three months.

1 Old Central Business District 6 Ampang Hilir / U-Thant

Price 3 months Price 3 months

N/A 0.7%

Rent 3 months Rent 3 months

N/A -6.8%

Prime gross yield Prime gross yield

N/A 4.7%

7 17 2 Perdana Botanical Garden / KL Eco City / Seputeh

Price 3 months Price 3 months

N/A -2.0% 13 Rent 3 months Rent 3 months

N/A -6.4% 16 Prime gross yield Prime gross yield 12 14

N/A 4.8%

3 8 South 10 Price 3 months Price 3 months

-0.2% 3.3% 15 2 Rent 3 months Rent 3 months

-4.0% -4.3%

Prime gross yield Prime gross yield

4.1% 4.7% 11 9 4 9 KL Sentral /

Price 3 months Price 3 months 7 -3.7% 4.5% Rent 3 months Rent 3 months 8

8.1% 6.2%

Prime gross yield Prime gross yield

3.2% 4.9%

5 Imbi / Pudu 10

Price 3 months Price 3 months

N/A -3.6%

Rent 3 months Rent 3 months

N/A 2.2%

Prime gross yield Prime gross yield

N/A 3.5% Local Performance

Price 3 months | the change in average prices over the 3 months to June 2018 Rent 3 months | the change in average rents over the 3 months to June 2018 Prime gross yield | the gross yield at June 2018 given average prices and rents

15 11 Bangsar /

Price 3 months Price 3 months

0.0% -1.6%

Rent 3 months Rent 3 months

5.6% -4.7%

Prime gross yield Prime gross yield

4.3% 2.6%

16 Kampung Sungai 12 Mont’ Kiara / Penchala Malay Reserve

Price 3 months Price 3 months

0.7% N/A

Rent 3 months Rent 3 months

0.0% N/A

Prime gross yield Prime gross yield

5.8% N/A

3 6 13 Dutamas 17 Desa ParkCity Price 3 months Price 3 months

1 4 3.3% 7.1%

Rent 3 months Rent 3 months

5 7.2% -4.3% Prime gross yield Prime gross yield

4.6% 3.5%

14 / Kenny Hills ()

Price 3 months

3.9%

Rent 3 months

N/A

Prime gross yield

N/A 6

Local Focus Kuala Lumpur City Centre

Overlooked by the iconic Petronas Twin Towers, Kuala Lumpur City Centre combines the buzz of being in the middle of the action – and the opportunity to shop until you drop – with the calm sanctuary of KLCC Park. It is also home to some of Kuala Lumpur’s most exclusive and luxurious properties.

The self-contained Kuala Lumpur As the heart of Kuala Lumpur, KLCC Over the past five years, there has City Centre (KLCC) blends is a popular tourist destination. been continued pressure on the commercial, retail, hotel, Its offering includes an array of area’s price and rent of high-end residential and recreational uses. shopping, dining and entertainment residential units. This is the result Its 100 acres of land area continues options, including the premier of the growing mismatch between to undergo development, with the shopping centre Suria KLCC with supply and demand, impacted, tree-lined Park Boulevard serving more than 300 stores. KLCC is also among other factors, by cooling as a transition between the public home to one of Malaysia’s most measures and falling crude oil prices. natural retreat and the private iconic landmarks, the 88-storey commercial domain. Petronas Twin Towers. This over-supply has encouraged greater competition within Other notable developments within the market to secure buyers. KLCC include the 58-storey Subsequently, many developers Menara 3 Petronas, Mandarin are partnering with international Oriental Kuala Lumpur and the luxury hospitality and lifestyle Kuala Lumpur Convention brands to give an integrated Centre. Within the masterplan offering. The 209-room Four development is the 50-acre urban Seasons Kuala Lumpur hotel sanctuary of KLCC Park, which opened on 1st July 2018 and forms offers a variety of amenities part of a 65-storey tower that including a two-acre children’s incorporates a retail podium playground, a wading pool, anchored by Robinsons, 27 running tracks and footpaths. serviced apartments and 242 private residences. This comes in Completed in 2009, The Binjai addition to the existing market on the Park is the only existing that includes the St Regis Kuala residential component within the Lumpur, offering 208 rooms (52 KLCC precinct and offers 171 units suites) and 160 luxury residences. What you of exclusive condominiums with could buy for… unobstructed view of the KLCC The attraction of KLCC is further skyline. Touted as the city’s most enhanced by its well-connected RM4 million expensive condominium, one of its rail and bus network. The KLCC A four-bedroom triplex penthouses was reportedly development sits on the Kelana Jaya serviced apartment sold for RM38 million in 2010. line of the light rail transit (LRT), a in The Troika Last year, a 3,219 sq ft unit was 46.4km track with 37 stations that transacted for close to RM10 million. forms part of the Greater Klang RM10 million Valley integrated transit system. A four-bedroom A number of luxury residential This connectivity is complemented serviced apartment developments have since been by the bus hub located outside the along Persiaran KLCC built on the outskirts of KLCC, KLCC station, along Jalan Ampang complete with views of the Twin and Jalan P Ramlee, and Pavilion RM30 million Towers and the KLCC Park. These Kuala Lumpur, the international A four-storey penthouse include The Troika, Oval Kuala shopping destination in the Bukit in The Binjai on the Park Lumpur, Le Nouvel, Stonor Bintang shopping belt, accessible Park, Park Seven, One KL and from the KLCC via an air-conditioned Quadro Residences. elevated pedestrian walkway. Property Snapshot Property Snapshot*

In this section, Knight Frank highlights certain characteristics of properties that appear to be driving demand. Using data collected from the National Property Information Centre (NAPIC) for Q1 2018, it is possible to derive patterns of property characteristics that help readers to better understand the local market.

NAPIC found that in the first quarter of 2018, a total of 3,002 homes were sold in the Federal Territory of Kuala Lumpur. Over the same time period, according to NAPIC, 9,962 new homes were completed and construction was commenced on another 8,390 units.

High-Rise Residential Properties

Of the 3,002 transactions in the Federal Territory of Kuala Lumpur in Q1 2018, over half of them were high-rise residential units. Within the 1,630 high-rise transactions, 69.9% were from condominium sales and 30.1% were serviced apartment sales. For new completions in Q1 2018, 50.3% or 5,013 units were condominiums and 49.7% or 4,949 units were serviced apartments. It is evident that the combined scarcity of land and rising land costs, especially in prime locations, cause developers to favour high-rise developments that feature attractive facilities. Here, the facilities provided range from swimming pools to gymnasiums and sky gardens. An example of a high-rise residential property is illustrated on the right. The Aira Residence

Location

From the 1,630 high-rise residential transactions, the most popular locality was Kuala Lumpur Town, which encompasses Kuala Lumpur City Centre (KLCC), Bukit Bintang and the Central Business District (CBD). These areas accounted for 427 or 26.2% of all high-rise residential sales in Q1 2018. The locality is well served by a public transport network, including rail lines and multiple bus services. An example of a property located in Bukit Bintang is illustrated on the right.

The Robertson

Branded Residences

Branded residences are becoming an increasingly prominent feature in the Federal Territory of Kuala Lumpur, particularly in the capital city. With six branded residences being completed between 2014 and Q2 2018 and five due to be completed by 2021, the luxury properties are in greater demand. Branded residences have become popular worldwide due to the convenience they provide. They offer buyers the option of the full use of hotel facilities including housekeeping, access to a concierge and room service. They also provide international buyers with a sense of security that their property is safe, under surveillance and well-maintained in their absence. An example of a branded residence is illustrated on the right. RuMa Hotel and Residences

*The property listed in this section is for reference only. HSBC does not hold a view of the property and is not soliciting, advising or recommending any reader to buy or sell the property. Readers should be aware of changes to the price of the property and exercise proper due diligence before entering into any property transaction. 8

Next Steps

Please contact your HSBC Premier Relationship For property enquiries: Manager or call our HSBC Premier hotline: Kelvin Yip Associate Director, Residential Sales Hong Kong and Leasing/Project Marketing, Malaysia +852-2233-3322 +603 2289 9612 www.hsbc.com.hk [email protected]

Dominic Heaton-Watson Associate Director, International Project Marketing, Malaysia +603 2289 9741 [email protected]

Judy Ong Executive Director, Research & Consultancy, Malaysia +603 2289 9663 [email protected]

Important Notice Important Notice This report is issued by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”). The content of this © Knight Frank LLP 2019 – This report is published for report, including but not limited to the information stated and/or opinion(s) expressed in this report, is exclusively general information only and not to be relied upon in prepared and/or provided by Knight Frank LLP. This report is to provide a high level overview of a specific property any way. Although high standards have been used in market, and is for information purposes only. HSBC has not been involved in the preparation of such information the preparation of the information, analysis, views and and opinion. HSBC makes no guarantee, representation or warranty and accepts no responsibility for the accuracy projections presented in this report, no responsibility or and/or completeness of the information and/or opinions contained in this report. In no event will HSBC or HSBC liability whatsoever can be accepted by Knight Frank Group be liable for any damages, losses or liabilities including without limitation, direct or indirect, special, incidental, LLP for any loss or damage resultant from any use of, consequential damages, losses or liabilities, in connection with your use of this report or your reliance on or use or reliance on or reference to the contents of this document. inability to use the information contained in this report. This report does not constitute and should not be construed As a general report, this material does not necessarily as a solicitation, an investment advice or a recommendation to any reader of this content to buy or sell properties, represent the view of Knight Frank LLP in relation to nor should it be regarded as investment research or tax or legal advice. HSBC is not recommending or soliciting any particular properties or projects. Reproduction of this action based on it. Any market information shown refers to the past and should not be seen as an indication of future report in whole or in part is not allowed without prior market performance. You should always consider seeking professional advice when thinking about undertaking any written approval of Knight Frank LLP to the form and form of investment. This report is distributed in Hong Kong and may be distributed in other jurisdictions where its content within which it appears. Knight Frank LLP is a distribution is lawful (but not intended for jurisdiction where its distribution is unlawful). This report is not intended limited liability partnership registered in England with for anyone other than the recipient. The contents of this document may not be reproduced or further distributed registered number OC305934. Our registered office is 55 to any person or entity, whether in whole or in part, for any purpose. All non-authorised reproduction or use of this Baker Street, London, W1U 8AN, where you may look at document will be the responsibility of the user and may lead to legal proceedings. a list of members’ names.