Kuala Lumpur’s residential market will remain ‘challenging’: Nawawi Tie Leung

By
/ EdgeProp
|
April 26, 2019 11:00 AM SGT
Kuala Lumpur city skyline
In the short to medium term, the residential market in Malaysia’s capital city, Kuala Lumpur, will remain “challenging”, says Malaysia-based real estate consultancy Nawawi Tie Leung (NTL), a member company of the Edmund Tie & Company Group.
Affordability is the key issue among local buyers, due to an increasing cost of living, low income levels, and supply-demand mismatch, highlights the firm in an April 22 report on KL’s real estate market for 1Q2019.
‘Subdued’ residential market
Future supply of high-end condominiums in Kuala Lumpur (Source: NTL Research)
The residential market remained “subdued” and in the mode of “self-correcting” over the quarter, according to the report. This was due to three factors: soft demand, a high number of unsold residential properties, and increased loan rejection.
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Condominiums priced above RM500,000 ($164,352) have contributed significantly to unsold units in the market. In 3Q2018, unsold apartments in Malaysia increased by almost 50% y-o-y to 30,115 units worth RM19.45 billion. If the category is broadened to include serviced apartments and small offices/home offices (SOHOs), the numbers will rise to 40,916 units valued at RM27.38 billion.
There was no completion of high-end residential projects in 1Q2019. However, over 4,600 units are expected to be completed this year, with 54% located in the city centre.
Despite the gloomy outlook, prices and rents for high-end condos in Kuala Lumpur showed a marginal improvement in the same quarter. Prices rose 3.2% q-o-q to RM1,049 psf, while rents increased 1.1% q-o-q to RM3.82 psf per month.
The Malaysian government has focused on affordable housing this quarter, announcing various initiatives targeting the property glut, homeownership and affordability issues, the report states. These include the provision of one million affordable homes in the next 10 years; a funding of RM1 billion through affiliated banks; and a new National Housing Policy from 2018 to 2025 emphasising on a rent-to-own scheme for the bottom 40% of the income group to increase homeownership.
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A Home Ownership Campaign, announced in Malaysia’s Budget 2019 last November, also aims to encourage property ownership through stamp duties exemptions for purchases of residential units made between January and June 2019, and through discounts offered by housing developers.
High demand for office space
Price and rental indices of high-end condominiums in Kuala Lumpur (Source: NTL Research)
Office space at KL Sentral, the largest transportation hub in Malaysia integrating all major railway networks, has continued to attract high demand from multi-sector companies. Rentals have appreciated 2.7% at KL Sentral, at an average of RM7.10 psf in the quarter, highlights NTL in the report.
The average occupancy rate of prime office buildings in KL Sentral has remained stable at an average of 96%.
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Meanwhile, rentals in the Golden Triangle – Kuala Lumpur’s shopping, entertainment and commercial hub, bordered by Jalan Tun Razak, Jalan Ampang, and Jalan Maharajalela – has continued to be passive, recording a minimal increment from RM7.12 psf to RM7.23 psf in 1Q2019.
The average occupancy rate in Kuala Lumpur was unchanged at 80%, with total stock stable at 81.8 million sq ft from the previous quarter. Although no new office buildings were completed in the quarter, about 3.8 million sq ft of office space is slated for completion this year, all located within the Golden Triangle. This comprises 70% of the incoming supply in 2019.
New York-based co-working operator WeWork will be opening its first co-working space in Kuala Lumpur in 2Q2019. This will be its largest office in Southeast Asia, spanning 100,000 sq ft with the ability to accommodate 1,900 members.
Amid the ample supply of new office stock coming onto the market, NTL expects office rentals to be pushed downwards. However, rentals for prime office spaces will stay unchanged, it says.

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