RESEARCH REAL ESTATE HIGHLIGHTS 2ND HALF 2015 KUALA LUMPUR PENANG JOHOR BAHRU KOTA KINABALU HIGHLIGHTS KUALA LUMPUR HIGH END CONDOMINIUM MARKET Sluggish market with potential buyers and investors adopting ECONOMIC INDICATORS Kiara; DC Residency in Damansara ‘wait and see’ approach. Heights; and Damai 88, A Residency Amid domestic and external headwinds, D’Suria, 9 Madge and Brunsfield the Malaysian economy continued to Transaction volume in the Residences @ U-Thant in the Ampang moderate, recording a growth of 4.7% in Hilir / U-Thant area. condominium / apartment the third quarter of 2015 (2Q2015: 4.9%), segment continue to decline. driven mainly by private sector demand. Another seven projects, scheduled for For the whole year of 2015, the country’s completion by the first half of 2016, will contribute some 1,998 units to the Prices to remain flat generally economy is expected to expand by 4.5% existing stock. The bulk of this future with rentals expected to to 5.5% (2014: 6.0%). supply are located in KL City (1,591 move south amid heightened Private consumption which grew by 8.8% units), followed by the localities of KL competition between existing in 1Q2015 (4Q2014: 7.6%) decelerated Sentral and Mont’ Kiara with 160 units supply and new completions. to 6.4% in 2Q2015. Going forward, and 118 units respectively. The projects it is expected to moderate further as include Pavilion Banyan Tree Signatures, Greater level of product households continue to be concerned Le Nouvel, Vortex Suites, The Ritz- over the state of the economy amid innovation and marketing Carlton Residences Kuala Lumpur, KL uncertainties arising from implementation strategies amid a challenging Trillion, The Residences at The St. Regis of the Goods & Services Tax (GST), market with more projects Kuala Lumpur and One Kiara (Tower A). further weakening of the local currency offering leaseback arrangements and softer labour market conditions. The impending completions of Pavilion and pool management Meanwhile, private investment which Banyan Tree Signatures, The Ritz- programmes. expanded by 11.7% in 1Q2015 (4Q2014: Carlton Residences Kuala Lumpur and 11.1%) contracted sharply to 3.9% The Residences at The St. Regis Kuala in 2Q2015 as business sentiment Lumpur, leveraging off the quality of weakened. international-class hotel brands, mark the new era of luxury living in Kuala Lumpur. Headline inflation averaged at 2.9% in June and July (2Q2015: 2.2%) Despite the sluggish high end residential reflecting the effects of higher domestic market, several notable projects were fuel prices and the impact of the GST. previewed and launched during this half Moving forward, it is expected to peak year. in early 2016 before moderating for the The latest debut of branded residences remainder of the year. Unemployment is YOO8 by Kempinski, forming part of rate increased marginally to 3.2% in July the RM5.4 billion 8 Conlay integrated from 3.1% in the preceding month. mixed use project that also comprises During the review period, the Overnight retail and hotel components. Tower A, Policy Rate (OPR) remained unchanged featuring 564 units sized from 700 sq ft to at 3.25%. 1,300 sq ft, was launched on November 18. Despite its new benchmark pricing, SUPPLY & DEMAND averaging at RM3,200 per sq ft, it has reportedly achieved 70% booking. Tower The cumulative supply of high-end B with 468 units is slated for launch by condominiums in Kuala Lumpur stands 1H2016. at 42,749 units following the completion of 3,139 units in the second half of 2015. Designed by Pritzker prize winner, Jean In terms of distribution, Mont’ Kiara / Sri Nouvel, the 195-unit Le Nouvel KLCC Hartamas contribute about 48.0% (1,508 by Wing Tai Asia is a Build-Then-Sell units), followed by KL City with 35.5% project. The indicative pricing for the (1,113 units). The remaining units are luxury apartments with typical sizing located in Ampang Hilir / U-Thant area of 1,810 sq ft to 2,832 sq ft is from (518 units or 16.5%). RM2,200 per sq ft onwards. The project is expected to be launched next year. Notable completions include Face Platinum Suites (Phase 1), Mirage On October 1, UDA Land Development Residence and Crest Sultan Ismail in Sdn Bhd unveiled its latest project known KL City; Concerto and Verdana in North as Anggun Residences. Located within 2 REAL ESTATE HIGHLIGHTS MALAYSIA walking distance from the Medan Tuanku with guaranteed rental returns to boost Residences, were transacted in excess of monorail station, Anggun Residences sales while in the secondary market RM1,700 per sq ft in 1H2015. Meanwhile, offer 384 units of serviced apartments (sales and lettings); there are ample prices of larger units in The Troika, atop a 3-storey retail podium, priced from choices and opportunities for buyers and Quadro and One KL, sized above 2,200 RM1,300 per sq ft. tenants looking for good buys / ‘bargain’. sq ft, ranged from about RM1,100 to RM1,300 per sq ft. Bina Puri Holdings Bhd, the developer for In 3Q2015, Kuala Lumpur recorded the Opus Residences, has announced 1,694 transactions in the condominium In the primary market, prices of luxury that all the units for Opus Tower 2 will be / apartment segment, 6.3% less than branded serviced residences range from equipped with Calvin Klein furniture and the preceding quarter (2Q2015: 1,808 RM2,000 to RM3,000 per sq ft. Gorenje kitchen appliances. The units, transactions). The existing stringent Brunsfield Residence @ U-Thant, a sized from 700 sq ft to 1,100 sq ft, are lending guidelines continue to impact recently completed low rise condominium priced from RM1,500 to RM1,600 per sq ft. sales. development, is retained by the In the locality of Ampang Hilir / U-Thant, During the review period, asking prices developer for investment purpose. The KSL Group’s latest project known as 18 and rentals in most locations were project offers 93 partially furnished units Madge is designed by Veritas Architects. generally flat. spread across six blocks with typical The luxury low-density condominium built-up areas sized from 3,357 sq ft to development features 48 units with In KL City, high-end condominiums with 4,444 sq ft. Asking rentals start from typical sizing from 2,234 sq ft to 4,207 small to mid-unit sizing ranging from RM15,000 per month. Knight Frank sq ft and two penthouses sized at 13,913 about 600 sq ft to 1,300 sq ft in selected Malaysia is the Sole Leasing Agents for sq ft and 14,803 sq ft. Selling price starts schemes such as ViPod Residences, the project. from RM2.7 million. Marc Serviced Residence and Pavilion Agile Mont’ Kiara, designed by renowned Singaporean architectural firm, DP Architects, opened its 44-storey Tower H for sale in October. The 171 partially furnished units are priced from RM900 to RM950 per sq ft on average. To date, the tower has reportedly achieved circa 50% booking. Upcoming notable projects with residential components include 8 Kia Peng by I-Bhd; Stonor 3 - a joint- Brunsfield Residence - The latest landmark at U-Thant venture (JV) project between Tan & Tan Developments Berhad and Mitsubishi Jisho Residence; Casa Kiara 3 in Mont’ TABLE 1 Kiara (288 units with GDV of RM336 Completion of High End Condominiums in 2H2015 million) by Sunway Property; Phase 1 of The Belfield by Tradewinds Corporation (high-rise residences centred on a premium retail avenue); a residential block within the on-going KL Gateway development by Suez Capital; the Bukit Bintang City Centre (BBCC) – a JV project between Eco World Development Group Bhd, UDA Holdings Bhd and the EPF; and Phase 1 of Pavilion Damansara Heights by Impian Ekspresi of Pavilion Group and the Canada Pension Plan Investment Board (CPPIB). PRICES AND RENTALS With market sentiment remaining weak, potential buyers and investors continue to adopt a ‘wait and see’ approach. In the primary market, developers are * Pending Certificate of Completion and Compliance (CCC) offering attractive home ownership packages and creative financial deals Source: Knight Frank Research 3 OUTLOOK fringe locations. Kuala Lumpur also continues to witness the entry of more branded residences as The competitive high end condominium Market sentiment for the high end it moves towards becoming a world- market is also driving developers to condominium segment remains class city by 2020, supported by major greater level of product innovation and cautious going forward, as it continues investments in its public transportation marketing strategies. to be impacted by the various cooling system. measures, softening demand and a There has been an increased trend of The on-going and upcoming slowdown in the economy. Some of projects offering leaseback arrangements infrastructure works that include the the projects scheduled for launch by and pool management programmes Light Rail Transit (LRT) extension lines 1H2016 may be deferred. with guaranteed rental returns (GRR) to and Mass Rail Transit (MRT) lines boost sales and attract potential buyers The impending completions of new will promote more transit oriented and investors looking for long term projects amid a weak market is developments (TOD) along the investment in terms of rental returns and expected to heighten competition in the transportation routes. rental market, both in KL City and its potential capital appreciation. TABLE 2 Average Asking Prices and Rentals of Existing High End Condominiums * Excludes Desa U-Thant and Seri Hening *** Includes Twins @ Damansara Heights ** Excludes Binjai on the Park but includes Pavilion Residences **** Excludes Verve Suites which comprise mainly fully furnished small units Source: Knight Frank Research FIGURE 1 Projection of Cumulative Supply for High End Condominiums 2009 – 2016(f) Source: Knight Frank Research 4 REAL ESTATE HIGHLIGHTS MALAYSIA HIGHLIGHTS KUALA LUMPUR & BEYOND KUALA LUMPUR (SELANGOR) Growing pressures on both rental and occupancy levels OFFICE MARKETS due to a high supply pipeline of existing and new stock amid a MARKET INDICATIONS weaker leasing market with lesser enquiries.