Slower luxury condo sales expected

Market demand for top-tier luxury condominium and serviced apartment units is expected to soften as purchasers become more selective and discerning and developers become increasingly cautious over over-supply concerns, leading to slower sales.

C H Williams Talhar & Wong Sdn Bhd (WTW) senior executive director P’ng Soo Theng said factors that led to such a weak market situation could be attributed to the country facing a great deal of uncertainty this year.

• Malaysia prepared for its 12th General Elections in March 2008 which was met with unprecedented results

• Malaysia faced a 41% petrol (63% diesel) price hike in June 2008

• The Consumer Price Index in June hit a 26-year high of 7.7%

• Rising defaults on sub-prime mortgages in the US triggered a global crisis leading to a gradual withdrawal of investment funds in the region

Under such circumstances, affordability is now of great concern as daily living expenses, particularly so for the middle to lower income group, forms a larger portion of their disposable income and the sales of “Big Ticket” items are cautioned. The Kuala Lumpur City Centre (KLCC) area represents the top-tier condominium and serviced apartment market in the country.

In the last two years, prices have doubled breaching the RM2,000 per sq ft benchmark. Foreigners (Singapore, Hong Kong, South Korea and the Gulf nations) make up about 30-40% of purchasers as prices, despite the increase, are still considered affordable by regional standards.

The exemption of RPGT (Real Property Gains Tax) and lifting of the need for approval from the FIC (Foreign Investment Committee) are factors attracting foreign investors.

With the global financial situation still unsettled as well as the current political climate in the country together with imminent key interest rate hike, many are now adopting a “wait-and-see” attitude.

Possibility is greater that purchasers will refrain from buying rather than cancelling their bookings or purchases.

With the uncertainty from spiralling costs, pressure on building materials and electricity tariff hike, purchasers would probably switch to purchasing units in prime locations as landed properties in prime locations are considered as a hedge against inflation.

KLCC condominium properties have not gone up in price within the last two months. There actually have been no new launches within KLCC in the first half of 2008. “We believe that buyers are in a position to “pick, choose & negotiate” in the current scenario,” advised P'ng.

“The immediate response to the current scenario has already been observed during the first five months of 2008 where fewer developers are launching residential units.

“Having monitored the daily printed media of new residential schemes advertised for sale, our findings reveal that during the months January to May 2008, some 3,333 residential units were launched in the Klang Valley. These included terraced, semi-detached and detached houses as well as town villas and condominiums or apartments in areas extending to Shah Alam, Semenyih, Klang, Sg Buloh, Bangi, Rawang, Puchong and Putrajaya.

“In contrast, about 10,780 residential units was launched from January to June 2007.”

Launch Period: Residential Units Launched

1st Half, 2007: 13,780

2nd Half, 2007: 6,599

Jan–May 2008: 3,333

Source: Daily monitor of the print media compiled by WTW - By Johnni Wong (The Star)

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