Luxury residences in the prime property area surrounding KLCC are no longer selling at prices as high as RM2,500 per square foot, but are now being sold at prices below RM1,800, a property consultancy firm has said.
Tan Sri Abdul Rahim Abdul Rahman, executive chairman of Rahim & Co, noted that the prices had fallen in a span of just a few years for high-end residences.
“When we started to do upmarket residential properties especially in the KLCC, remember developers asking prices beyond the KL market, they compared it to the market in Singapore, Hong Kong, so on, putting prices up to RM2,500 per square foot, therefore taking advantage of the market at that time.
“However, these prices have now gone down to below the RM2,000 mark. I think generally the prices of the high-end houses ranging about RM1,500 per square foot,” he told reporters today at the launch of his firm’s research unit’s annual publication Rahim & Co Research — Property Market Review 2017/2018.
“People will not pay higher than say RM1,800 (per square foot) but developers will not bring the prices to any lower, say RM1,300 (per square foot) so depending on the type of development, where it is, what facilities there are in each building, that’s the price range. So no more the RM2,000-RM2,500 per square foot which we had three years ago,” he added.
Instead of appreciating in value, some of the luxury residences in the KLCC area have negative compound annual growth rates (CAGR) over the 2015-2017 period, the firm’s data showed.
In examples provided by Rahim & Co on high-end condominiums and serviced apartments in the KLCC area, the average transaction prices for One KL in 2017 was RM1,093 per square foot or at a CAGR rate over the years 2015-2017 of -9.2 per cent, while Quadro Residences had average transaction prices in 2017 of RM1,174 per square foot or a CAGR rate over the same period at -2.9 per cent.
For The Troika, it was at RM1,230 per square foot in 2017 or at a CAGR rate of -3.7 per cent for 2015-2017, while for St Mary Residences, it was at RM1,237 per square foot in 2017 and at -5.1 per cent CAGR rate during the same period.
For Pavilion Residences, the average transacted price in 2017 was at RM1,582 per square foot or -6.7 per cent CAGR.
But other examples fared better with growth in their CAGR rate, such as The Meritz (RM1,011 per square foot) at CAGR rate at 2.3 per cent; ParkView Serviced Apartments (RM1,106 per square foot) at CAGR rate of 1.8 per cent; The Horizon Residences (RM1,512 per square foot) or at CAGR rate of 5.2 per cent, Marc Serviced Residences (RM1,536 per square foot) or at CAGR rate of 2.6 per cent and Vipod Suites (RM1,638 per square foot) or at CAGR rate of 0.5 per cent.
The data for the average transacted prices takes into account both smaller size and bigger size units in a property.
In a press release, Rahim & Co also said that “the high-end residential category remains flat with prices seeing -10 per cent corrections in actual transactional prices in the past 18 to 24 months, or approximately 15 to 20 per cent lower than original asking prices in secondary market.”
The firm in its annual Property Market Review 2017/2018 noted that Kuala Lumpur’s luxury properties were still relatively affordable for high-net worth individuals and foreign buyers, as the prices in KL of between US$400-US$700 per square foot were lower when compared to other key South-east Asian cities such as Bangkok (US$900-US$1,000 psf) and Singapore (US$2,000 psf and above).
The report said only a few luxury projects were launched last year, including upscale neighbourhood Bangsar’s The Estate, two properties along Jalan Yap Kwan Seng — Isola KLCC and Ascott Star KLCC.
When asked to comment on the government’s announcement last November of a freeze on new luxury property projects that excludes city centre projects subject to the Finance Ministry’s approval, Rahim & Co’s research director Sulaiman Akhmady Mohd Saheh said “the freeze would not have immediate impact right now because it is quite new”.
Sulaiman said the freeze’s intention of curbing new incoming supply while allowing for existing new projects to be absorbed by the current market demand was good, adding that this move was currently being studied possibly as a blanket ban would affect the government’s entry point projects under the Economic Transformation Programme.
As for the firm’s real estate agency director Robert Ang, he felt that the freeze of approvals for new luxury projects is not good as it would disrupt free business, noting that developers should be allowed to build such projects if they have the funds and capability to hold.
“When you freeze and subsequently they announced there’s going to be selective freezing, so that opens up a lot of questions. I think what they should have done is they should have employed other measures and impose on banks to have more stringent feasibility studies,” he said.
Weighing in, Sulaiman said banks currently instruct property developers — who want to borrow loans - to appoint independent consultants to conduct feasibility studies or market studies on a proposed project.
“But I think there must be a balance, because there needs to be studies done by the bank themselves, the bank appoints consultants so they are really independent,” he said.