KL on the luxury radar
Kuala Lumpur is just stepping into the prestige home market and is looking to attract international buyers. 'We are finally on the radar screens of a lot of foreign investors,' says Robert Ang, managing director of Prestige Homes, the high-end service arm of Malaysian property consultancy Rahim & Co. 'In my 25 years in the real estate business, this is the highest level of interest that I've seen from foreign investors in the high-end market.'
Bandar Raya Developments is well known for its properties in the trendy Bangsar suburb, and was the first developer to be listed on the Kuala Lumpur stock exchange in 1968.
General manager for sales and marketing, Rohan Cavaliero, says: 'The luxury property market has continued to perform well in the past few years, and this was largely underpinned by foreign buyers.'
Demand for prestige homes in Kuala Lumpur, in part due to offshore funds, has left the rest of the property market in Malaysia far behind. According to Mr Ang, the high-end property sector was the first to rebound after the property crash brought on by the 1997 Asian financial meltdown.
Prices in this sector went back to their pre-1997 peak as early as 2000, and since then have been setting new records practically every year, Mr Ang says.
'It's a common story worldwide. Whenever there is a lot of wealth accumulation, it puts pressure on the high-end property market.'
Land prices in the upmarket enclaves of Damansara Heights, Taman U-Thant in Ampang, Kenny Hills and Bangsar are at a high of M$300 (HK$675) to M$450 per sqft, and top-tier condominiums in the prestigious Kuala Lumpur City Centre area are selling for M$800 to M$1,000 per sqft, compared with M$450 per sqft two years ago.
Investors would do well to concentrate on these established locations, Mr Ang says. 'They will be almost assured of steady capital appreciation and good rental yields from these investments. Investors can expect a total annual yield of between 12 and 15 per cent. In the past, some foreigners have come in and strayed from the established areas. They tried new areas and got their fingers burnt.'
Developers are taking advantage of buoyant demand to push prices up. Bandar Raya has increased the prices of several of its developments. The Troika, its high-end Norman Foster-designed condominium project near the city centre, scheduled for completion in mid-2009, has gone up to M$1,350 per sqft from about M$1,000 per sqft.
One Menerung, a luxury condominium in the Bangsar area, also scheduled for completion in mid-2009, is now selling for M$800 per sqft, up from M$700 per sqft last year.
The industry is keenly watching two projects expected to set the pace for the market in terms of pricing and quality.
The Binjai, with its unimpeded view of the Petronas Twin Towers, should be launched at the end of the year. Developed by Layar Intan, it has 171 condominiums in two towers, ranging from 2,200 sqft to two 10,000 sqft super penthouses with private pools.
Developments in Malaysia are usually sold off-plan, but Layar Intan is considering selling these condos on completion. Sales will probably be by invitation only, with prices ranging from M$1,500 to M$2,000 per sqft.
The other project expected to set new standards is Four Seasons Centre. This is a mixed-use development in the city centre developed by a consortium led by Singaporean hotelier Ong Beng Seng. It will include a hotel, serviced apartments, and luxury condominium and retail units. The Four Seasons condominium units are expected to fetch M$2,000 per sqft.
The city centre is the place to be. Rohan Padmanathan, senior vice-president of Jones Lang Wootton in Kuala Lumpur, says it is fast becoming a hub for luxury condominiums.
Arul Lappan, senior manager at TD Aziz, the associate of King Sturge, one of the largest European property consultants, says: 'The city centre is becoming the best shopping area in KL. Transport, too, plays an important role, and the road network there is superb. There is also the monorail and the light rapid transit [rail line].'
Mr Cavaliero says: 'As KL matures into an international city, it needs a city centre where there is a high-end international enclave. [This area is now emerging].'
From an international perspective, high-end property prices in KL are a bargain. According to Mr Padmanathan, prices are 14 times lower than those in London, 12 times lower than those in Hong Kong and seven times lower than Singapore.
Malaysia's strong economy and the undervalued Malaysian dollar are also attracting foreign investors. And the Malaysian government recently eased regulations governing property purchases by foreigners.
As of December last year, foreign buyers no longer require Foreign Investment Committee approval when buying properties that cost M$250,000 or more. Foreigners can also buy as many units as they want, which no longer have to be for their own use.