Amid domestic and external headwinds, the Malaysian economy continued to moderate during the second half of last year according to the latest research from real estate firm Knight Frank, recording a growth of 4.7 percent in the third quarter of 2015 versus 4.9 percent in the second quarter, driven mainly by private sector demand.
For the whole year of 2015, the country’s economy was expected to expand by 4.5 percent to 5.5 percent (2014: 6.0 percent).
Private consumption, which grew by 8.8 percent in 1Q 2015 (4Q 2014: 7.6 percent) decelerated to 6.4 percent in 2Q 2015. Going forward, the real estate company said it is expected to moderate further as households continue to be concerned over the state of the economy amid uncertainties arising from implementation of the Goods & Services Tax (GST), further weakening of the local currency and softer labour market conditions.
Meanwhile, private investment which expanded by 11.7 percent in 1Q 2015 (4Q 2014: 11.1 percent) contracted sharply to 3.9 percent in 2Q 2015 as business sentiment weakened.
Headline inflation averaged at 2.9 percent in June and July (2Q 2015: 2.2 percent) reflecting the effects of higher domestic fuel prices and the impact of the GST. Moving forward it is expected to peak during early 2016 before moderating for the remainder of the year. The unemployment rate increased marginally to 3.2 percent in July from 3.1 percent during the preceding month.
SUPPLY & DEMAND
The cumulative supply of high-end condominiums in Kuala Lumpur stands at 42,749 units following the completion of 3,139 units in the second half of 2015. In terms of distribution, Mont’ Kiara / Sri Hartamas contributed about 48.0 percent (1,508 units), followed by KL City with 35.5 percent (1,113 units). The remaining units are located in Ampang Hilir / U-Thant area (518 units or 16.5 percent).
Notable completions included Face Platinum Suites (Phase 1), Mirage Residence and Crest Sultan Ismail in KL City; Concerto and Verdana in North Kiara; DC Residency in Damansara Heights; and Damai 88, A Residency D’Suria, 9 Madge and Brunsfield Residences @ U-Thant in the Ampang Hilir / U-Thant area.
Another seven projects, scheduled for completion by the first half of 2016, will contribute some 1,998 units to the existing stock. The bulk of this future supply is located in KL City (1,591 units), followed by the localities of KL Sentral and Mont’ Kiara with 160 units and 118 units respectively.
The projects include Pavilion Banyan Tree Signatures, Le Nouvel, Vortex Suites, The RitzCarlton Residences Kuala Lumpur, KL Trillion, The Residences at The St. Regis Kuala Lumpur and One Kiara (Tower A). The impending completions of Pavilion Banyan Tree Signatures, The Ritz Carlton Residences Kuala Lumpur and The Residences at The St. Regis Kuala Lumpur, leveraging off the quality of international-class hotel brands, marks a new era of luxury living in Kuala Lumpur.
Despite the sluggish high end residential market, several notable projects were pre-viewed and launched during this half year.
The latest debut of branded residences is YOO8 by Kempinski, forming part of the RM 5.4 billion 8 Conlay integrated mixed-use project that also comprises retail and hotel components. Tower A, featuring 564 units sized from 700 sq ft to 1,300 sq ft, was launched in November. Despite its new benchmark pricing, averaging at RM 3,200 per sq ft, it has reportedly achieved 70 percent bookings. Tower B with 468 units is slated for launch by 1H 2016. Designed by Pritzker prize winner, Jean Nouvel, the 195-unit Le Nouvel KLCC by Wing Tai Asia is a ‘build-then-sell’ project. The indicative pricing for the luxury apartments with typical sizing of 1,810 sq ft to 2,832 sq ft is from RM 2,200 per sq ft upwards. The project is expected to be launched next year.
On October 1, UDA Land Development Sdn Bhd unveiled its latest project known as Anggun Residences. Located within walking distance from the Medan Tuanku monorail station, Anggun Residences offered 384 units of serviced apartments atop a three-storey retail podium, priced from RM 1,300 per sq ft.
Bina Puri Holdings Bhd, the developer for the Opus Residences, announced all the units for Opus Tower 2 will be equipped with Calvin Klein furniture and Gorenje kitchen appliances. The units, sized from 700 sq ft to 1,100 sq ft, are priced from RM 1,500 to RM 1,600 per sq ft. In the locality of Ampang Hilir / U-Thant, KSL Group’s latest project known as 18 Madge is designed by Veritas Architects. The luxury low-density condominium development features 48 units with typical sizing from 2,234 sq ft to 4,207 sq ft and two penthouses sized at 13,913 sq ft and 14,803 sq ft. Selling prices start from RM 2.7 million.
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 RM 900 to RM 950 per sq ft on average. To date, the tower has reportedly achieved circa 50 percent bookings.
Upcoming notable projects with residential components include 8 Kia Peng by I-Bhd; Stonor 3 – a joint-venture project between Tan & Tan Developments Berhad and Mitsubishi Jisho Residence; Casa Kiara 3 in Mont’Kiara (288 units with GDV of RM 336 million) by Sunway Property; Phase 1 of The Belfield by Tradewinds Corporation (a high-rise residences centered 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) with guaranteed rental returns.
OUTLOOK
Knight Frank reported that market sentiment for the high-end condominium segment remains cautious going forward, as it continues to be impacted by the various cooling measures, softening demand and a slowdown in the economy. Some of the projects scheduled for launch by 1H 2016 may be deferred.
The impending completions of new projects amid a weak market is expected to heighten competition in the rental market, both in KL City and its fringe locations.
The competitive high-end condominium market is also driving developers to greater level of product innovation and marketing strategies. Knight Frank noted there has been an increased trend of projects offering leaseback arrangements and pool management programmes with guaranteed rental returns to boost sales and attract potential buyers and investors looking for long-term investment in terms of rental returns and potential capital appreciation.
Kuala Lumpur also continues to witness the entry of more branded residences as it moves towards becoming a world-class city by 2020, supported by major investments in its public transportation system. The on-going and upcoming infrastructure works that include the Light Rail Transit (LRT) extension lines and Mass Rail Transit (MRT) lines will promote more transit-oriented developments (TOD) along the transportation routes.
