Year of reckoning for luxury condos

There is recent evidence that higher-end landed properties in well-established locations could potentially outperform the overall property cycle in times of adversity, says OSK Research.

“This 'hedging' opportunity, stems from the hypothesis that the fast-rising 'baby boomers' of the 50s, who tend to be more affluent but risk-averse, are likely to hedge their wealth in mid- to high-end landed properties during uncertain times,” the research house said in its daily report today.

“Given that households are still flush with liquidity, this age group is unlikely to plough all the wealth back into the banking system given the low deposit rates amid the high inflationary environment,” it added.

Nonetheless, as all the market players are still trying to assess the severity of the potential collateral damage from the global financial crisis on Malaysia’s real economy, it said most home buyers are likely to stay on the sidelines for a while and may not return until the second half of next year.

OSK Research said 2009 will be a year of reckoning for luxury condos.

It has estimated that more than 5,000 units of luxury condos priced more than RM400 per square feet would come on stream in the Klang Valley by late 2008 and another wave of more than 5,000 units is expected to hit the market in 2009 before easing slightly to more than 2,000 units in 2010.

“Notwithstanding the risk of diminishing demand, these waves of incoming supply at about the same time, will severely depress rental yield by late 2008 and going into 2009/2010,” it explained. — Bernama