Luxury condo prices in the area of Kuala Lumpur City Centre (KLCC) have plunged 15 to 20 percent as the economic downturn occurs and foreigners attempt to cash out the best they can have, says a consultant of real estates.
In 2004, during the recovery process after the Asian financial crisis in 1998, the first to book for the high-end condos are Malaysian buyers, said Robert Ang, managing director of Rahim & Co. They bought the condos at half the price of many foreigners who went to the market in 2006 to 2007.
“Most foreigners bought at appreciated levels, so they are flexible about asking prices,” said Mr. Ang. “But Malaysians, having bought earlier, are getting returns of 7-8 per cent and have no reason to sell unless they are cash-strapped. Also, they can refinance as the cost of funds has decreased.” The good news is that there have been no forced sales, Mr. Ang said in a news conference.
Abdul Rahim Rahman, executive chairman of Rahim & Co., said he believed the prices in the area of KLCC would have glided anyway due to oversupply.
Over 1,760 units are expected to be completed this year in addition to 1,200 units completed two years ago.
“The apartments are not well occupied, so there has been some strain on rental yields and returns, which at the end of last year were 4-5 per cent,” said Mr. Ang.
The top apartments at KLCC are priced at RM3,000 or S$1,254 per square foot. However most projects are sold in the resale market at RM1,000 plus per square foot, though developers are still inquiring about RM2,000 per square foot for premium units, like the ones at OneKL.
Better times are most unlikely to come around. Buyers and sellers are aware that the 3.5 percent economic growth target of the government for 2009 may not be reached, as production and exports figures decrease.
Although sellers and buyers still claim that the overall property market is smoothly flowing, unknown fear has led to the close-collapse for luxury condo demand.
Mister Ang said the company has already advised its clients to defer new luxury development launches in half of Q2 or in Q3. The good news is that prices of landed property have remained, he said.
Within the last three years, foreigners went to the real estate of Kuala Lumpur, buying most of the units in projects at KLCC. They were drawn by the weak currency and an active market.
After the last recession in Malaysia in 1998, it took four years for the property market to recover. Mr. Rahim thinks that things could be at a fast pace this time, given that the decline can be quickly resolved.