High-end residential market unlikely to grow much, says expert

The residential market has swayed towards affordable housing due to the increasing interest from 1st-time homebuyers


THE high-end residential property market is expected to remain stagnant over the next quarters due to the increase in the number of overhang homes.

Based on the “Muted Global Conditions Affected the Malaysian Market” report for the second-quarter of 2019 (2Q19), the rising overhang is primarily an outcome of demand-supply mismatch and strict lending regulations.

The report, released by Nawawi Tie Leung Property Consultants Sdn Bhd (NTL), also revealed that the residential market has swayed towards affordable housing due to the increasing interest from first-time homebuyers.

“The need for affordable housing is undeniable. However, the demand-supply mismatch is resulting in the rising overhang. Thus, there is a need to evaluate this segment with a realistic approach.

“Overall, the high-end residential property market is anticipated to remain sluggish in such conditions for the upcoming quarters,” it said.

As such, the high-end residential market sampled in Kuala Lumpur (KL) continues to remain soft as there was not much activity in 2Q19.

According to the National Information Property Centre’s (Napic) Property Market Report 2018, the overhang in 2018 increased 30.6% from the previous year to 32,313.

The bulk of the overhang situation, mostly in Perak and KL, is in the high-rise category which stood at 43.4%, it said. Based on the Napic data, house prices continued to rise throughout 2018 with an increase of 3.1% in the house price index against 2017. However, prices for the sampled high-end residential projects were flat with marginal variation during 2Q19, the report noted.

It also said there was no completion of high-end residential projects in 2Q19, with over 4,000 units are likely to be completed in the remaining 2019.

During the quarter, prices and rents for high-end condominiums changed marginally and stood at RM1,036 per sq ft and RM3.86 per sq ft per month respectively, the report noted.

Meanwhile, NTL said escalating supply and slowing demand for office space are expected to impose challenges for the office market in KL over the next few years.

“For medium-to long-term security, we expect a growing trend of repurposing old office buildings, while the new or under construction buildings will explore alternative use.

“In fact, tech companies and co-working spaces are anticipated to drive the office market for the coming few quarters,” the firm noted.

NTL also said the total stock of office units in KL has increased in 2Q19, contributed by the opening of Menara Prudential in Tun Razak Exchange (TRX).

“The average occupancy rate in the city has dropped marginally to 79.7% in the quarter.

“However, office rents remained flat in the Golden Triangle and KL Sentral areas at RM7.23 per sq ft and RM7.10 per sq ft per month respectively,” it added. On the sales front, the company noted that there were two prominent buildings for sale in the quarter, including the Sheraton Imperial on Jalan Sultan Ismail, and Menara Celcom in Petaling Jaya.

The Sheraton Imperial comprising 398 rooms and 138,000 sq ft of office space, and the newly built 33-storey Menara Celcom with 450,000 sq ft net lettable area, are estimated to be approximately RM500 million each, it said.