Upward trend due to the strong cost push elements
THE high-rise residential property market is showing promising signs of growth, despite the influx of new units and prevailing oversupply situation.
Given the land scarcity in the city and its rising construction costs, Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong says high-rise properties will continue to move upwards due to the strong “cost push” elements.
New builds will be more costly to produce and hence, its higher pricing. Rentals will be affected as it is also a function of the capital values of the new units,” he tells Starbizweek.
However, Khong says demand will continue to increase as more urban migrants seek employment opportunities in urban areas.
“Rentals will continue to see strong demand (as many cannot afford to buy and will continue to rent) as they will still need a place to stay in the Klang Valley.
“We are seeing young professionals, expatriates and small families now favouring high-rise living due to affordability factors plus convenience, security and its amenities.”
Khong adds that retirees are also choosing high-rise properties over landed ones for similar reasons.
“Additionally, there is less physical maintenance required for a smaller place,” he says.
“The market is still seeing a significant influx of new high-rise units, but the challenge lies in balancing new supply against an oversupply situation to avoid negative factors on both capital values and rental yields,” Khong adds.
According to Knight Frank Malaysia in its Real Estate Highlights report for the first half of 2024, the high-end, high-rise residential segment in the Klang Valley is currently experiencing significant growth in market activity.
“This upward trend is highlighted by rising sales volumes and an increase in the number of newly launched projects.
“Over the past six months, there has been a concentration of developments in the KL City Centre, reflecting a shift towards investment portfolios, especially with the introduction of return on investment rental programmes.”
Knight Frank adds that the market’s momentum is further bolstered by government initiatives aligned with the Madani economic framework.
Khong says he expects demand for prime areas to pick up well, such as the KLCC and
Trx-bukit Bintang areas, which caters primarily to high-income earners and foreign expatriates.
“Many properties in the Golden Triangle area have been converted to short-term stay units targeting tourists for lucrative rental returns.”
Khong adds that high-rise projects in well-connected areas are also expected to see stronger value appreciation and higher rental returns, in particular properties near transit-oriented development zones, especially near new MRT and LRT expansion lines.
“Established residential areas like Damansara Heights and Bangsar should also continue to perform into the rest of 2024,” he says.
Meanwhile, down south in Johor, veteran property analyst Samuel Tan says the high-rise residential sector will perform better in the next couple of years, especially those that are easily accessible to the two causeways and near the Johor Baru Singapore Rapid Transit System (RTS).
“Reasonably priced highrise apartments away from the centralised location but within established localities, will perform better moving forward.
“This is because landed residential properties are getting very expensive and beyond reach for most first timers.”
Additionally, Tan says many overhang units that accumulated during the Covid-19 period have been cleared.
“The supply-demand dynamic is not skewed towards the buyer’s market anymore. Having said that, we also noticed that developers are “rushing” in to capture the upturn.
“We opine that it is advisable for developers to read the market carefully and buyers also need to do their homework, before plunging in.”
Knight Frank meanwhile says the highrise residential sector in Johor Baru has seen improvements, marked by the launches of new projects that have attracted significant interest.
“Purchase inquiries have been increasing, particularly for high-rise developments near the RTS link project.
“Moving forward, we expect the projects located near the city centre to maintain their upward trajectory, while others are still experiencing positive effects from the ripple.”
Improving rentals
Khong says rentals have been recovering post Covid-19, especially in areas such as in Bangsar, Mont’kiara, Bandar Sunway and Shah Alam (especially the Glenmarie area).
“Notably, Bangsar and Bandar Sunway have surpassed their pre-covid levels, but we see rental tension with the increasing new completions in Petaling Jaya and Subang Jaya.
“It is a tenant’s market and they are spoilt for choices, given the many new offerings with more modern lifestyle concepts, better locations and more attractive amenities moving forward.”
Khong says KLCC still remains on the recovery path.
“We hope the current relaxation of the Malaysia My Second Home programme will enhance the government’s efforts to move Kuala Lumpur city as a world-class business and entertainment hub, attracting more foreign investors and tourists.”
Khong says there are still strong fundamentals that are driving positive rental performance in high-rise residential properties.
“This is despite higher cost-of-living due to the increased service tax now, diesel subsidy rationalisation and the expected RON95 subsidy changes, as urbanisation trends, strong demographics, population growth and the constant migration of the younger generation to urban areas will support this rental demand.
“Upcoming infrastructure projects such as the MRT and LRT expansions are set to enhance the connectivity and desirability to many of such locations. This continues the strong and positive trend in the rental market moving strongly forward.”
Similarly, Tan says he has witnessed improving rental trends for high-rise properties in Johor.
“We do not have official data for rental transactions. However, we know that rentals have been increasing since the reopening of borders in the second quarter of 2022.
“The increase over the past two years was easily 20% to 25% per annum for serviced apartments in the Johor Baru city centre and Iskandar Puteri area.”
Tan says the demand was mainly from Malaysians working in Singapore initially.
“Subsequently, more Airbnb operators also leased these high-rise units when tourists started streaming in.
“More Singaporeans are also renting in Johor Baru to stretch their dollars, especially those who can work from home.”
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