The Edge/Savills Klang Valley High-Rise Residential Property Monitor for 2Q2020: Affordably priced units well-received in spite of challenging outlook

This article first appeared in City & Country, The Edge Malaysia Weekly, on August 17, 2020 - August 23, 2020.
The Edge/Savills Klang Valley High-Rise Residential Property Monitor for 2Q2020: Affordably priced units well-received in spite of challenging outlook
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The high-rise residential property market is anticipated to remain cautious for the second half of the year, says Savills Malaysia director of research and consultancy Amy Wong, in presenting The Edge/Savills Klang Valley High-Rise Residential Property Monitor for 2Q2020.

“Challenges remain with regard to the performance of the economy as well as job stability, which has been impacted by the Covid-19 pandemic. The end of the loan repayment moratorium on Sept 30, 2020, will be the next stress test for the residential property market,” she notes.

As part of the short-term economic recovery plan (Penjana), the Home Ownership Campaign (HOC) has been reintroduced from June 1, 2020 until May 31, 2021 to stimulate the residential property market.

Other incentives include real property gains tax (RPGT) exemptions for the disposal of up to three residential properties from June 1, 2020 until Dec 31, 2021 and the removal of the 70% loan-to-value financing margin for the third housing loan onwards for properties valued at RM600,000 and above during the HOC period.

On July 7, Bank Negara Malaysia cut the Overnight Policy Rate (OPR) by another 25bps to 1.75%, a historical low for the country’s borrowing rate.

“Although the OPR cut is meant for the stiff challenges [faced by] the economy, it also serves as a good buying opportunity for home buyers and investors who are looking for long-term gain,” says Wong.

Wong: The end of the loan repayment moratarium on Sept 30 will be the next stress test for the residential property market. (Photo by Savills)

According to Wong, the residential property market picked up slightly after the easing of restrictions on social and economic activities. “The total amount of loan applications and approvals for the purpose of residential property purchases recorded an increase in May, whereby the total loans applied for amounted to RM10.45 billion (+57% month-over-month), while RM3.41 billion (+37% month-over-month) of total loans were approved in the country.”

“Overall, the residential property market performance in Greater KL was mixed during the quarter. Some new launches reported good take-up rates thanks to the attractive incentives by developers and the government, whereas the secondary market remained slow due to the lack of motivated buyers. The asking property prices and rentals in the secondary market saw a marginal decline in 2Q2020 as compared to the preceding quarter,” says Wong.

In the prime areas of Kuala Lumpur, specifically in KLCC, Bangsar and Mont’Kiara, prices of sampled properties saw a quarter-on-quarter (q-o-q) drop during the review period. Rents, especially in the KLCC area, also declined further as a result of the economic slowdown.

“Some property owners in these prime areas are more willing to offer a lower rental. Nevertheless, property viewings for high-rise residential properties in Kuala Lumpur are slowly returning to pre-MCO (Movement Control Order) levels,” she adds.

Meanwhile, more affordably priced properties under RM500,000 located predominantly in suburban Kuala Lumpur have performed well despite the challenging market conditions, notes Wong.

For instance, the most recently launched M Luna in Kepong and M Adora in Wangsa Melawati have both reported overwhelming sales performance. The same applies to similar affordable developments, she adds.

In Selangor, the property market has not been spared the impact of the Covid-19 pandemic. The secondary market saw a downward adjustment in asking prices.

However, several new affordable housing schemes that were launched during the quarter were well received by home buyers.

As for units on the open market, affordable prices were seen at the recently launched D’Cosmos Residences in Empire City Damansara, following a good response for the first two phases — D’Quince Residences and D’Vervain Residences, whose prices range between RM560 and RM600 psf.

Embayu @ Damansara West, located in Seksyen U5, Shah Alam, was officially launched in March 2020 at an average price of RM470 psf.

Lower prices in KL

During the review quarter, property prices in KLCC were estimated to have dropped marginally from the preceding quarter.

Based on the sampled 2-bedroom high-rise residential units in KLCC, the average property price is estimated to have dropped by under 1% q-o-q to RM1,135 psf from RM1,145 psf in 1Q2020.

The average asking price for similar properties has declined to RM1,230 psf from RM1,260 psf in the preceding quarter, representing a 2.4% drop on a quarterly basis.

Properties in the KLCC area have clearly experienced a lower demand, including in the rental market, says Wong.

“As a result, prices and rents have to be adjusted downwards slightly. Although property owners in this area generally have strong holding power, they are now more willing to consider lower offers for their properties,” she adds.

On a positive note, certain residential projects in KLCC that were marketed overseas have received bookings following the lifting of lockdown measures in other countries.

In Bangsar, property prices were also estimated to be generally lower during the quarter in review. At the point of writing, no sales had been recorded in the area.

The average price of the sampled 2-bedroom high-rise properties is estimated to have adjusted downwards q-o-q by 0.5% to RM920 psf during the review period.

Asking prices in Bangsar, too, have gone down slightly compared with previous quarters by an average of 2.5% q-o-q to RM980 psf in 2Q2020. It was RM1,005 psf in 1Q2020.

Nevertheless, Wong notes that there are well-managed, low-density developments in Bangsar that remained unaffected in terms of price and rents, even with competition from nearby developments in the Mid Valley, KL Eco City and Kerinchi areas.

“Aside from that, the number of property viewings for high-rise residential properties in Bangsar is slowly returning to pre-MCO levels,” she adds.

In Mont’Kiara, property prices were estimated to be marginally lower during the review period. The average price for the sampled 2-bedroom properties were tentatively lower on a quarterly basis by less than 1% to RM620 psf in 2Q2020, compared with RM625 psf in the preceding quarter.

Average asking prices, however, have remained unchanged at RM705 psf compared with the preceding quarter.

“This shows that property owners in Mont’Kiara remain undeterred by the impact of the Covid-19 pandemic, while prospective buyers would naturally offer much lower than the asking price and be looking for bargains in this tough period,” Wong remarks.

Larger units remain competitive in Selangor

In Subang Jaya, the capital value of the sampled properties during the review period stood at RM540 psf, a marginal decrease from RM542 psf in the preceding quarter.

On a year-on-year (y-o-y) basis, larger units have managed to remain more competitive in terms of capital value than smaller ones.

For instance, units at Subang’s Olives Residence, with built-ups ranging from 1,400 to 1,500 sq ft, saw a 1% depreciation, from RM490 psf in 2Q2019 to RM485 psf in 2Q2020, while larger units with built-ups of 1,900 sq ft saw their value appreciate by 1.1% to RM455 psf from RM450 psf in the same period.

The same was seen at Subang Parkhomes. Comparing its units with built-ups of 1,000 to 1,200 sq ft and those of 1,400 sq ft, the former saw its capital value depreciate by 2.5% whereas that for the latter appreciated by 2.5%.

Asking prices of properties in Subang Jaya fell 1.7% to RM583 psf during the review period compared with RM590 psf pre-MCO.

In Bandar Sunway, capital values in the inactive secondary market fell to RM597 psf during the review period from RM599 psf in the preceding quarter.

Asking prices of properties in the area similarly decreased to RM625 psf in the quarter from RM627 psf in 1Q2020.

Nonetheless, based on a y-o-y comparison, the asking price trends in Bandar Sunway depreciated by a more significant 2.7% from RM642 psf in 2Q2019.

However, Nadayu28 Residences and LaCosta @ Sunway South Quay saw a slight increase in asking prices amid the pandemic. Nadayu28 Residences’ asking price increased to RM670 psf during the review quarter from RM665 psf in the preceding quarter.

Similarly, the sampled 3-bedroom units at LaCosta with built-ups of 1,600 sq ft recorded a 1.8% increase in asking price to RM830 psf from RM815 psf.

In Petaling Jaya, there was limited activity in the secondary market, which saw a marginal depreciation in value to RM635 psf during the review period from RM637 psf in 1Q2020.

Based on a y-o-y comparison, the sampled 3-bedroom units at Five Stones with built-ups ranging from 1,700 to 2,000 sq ft recorded an 11.6% increase in value to RM820 psf during the review period, compared with RM735 psf in 2Q2019.

“Despite negative sentiments of late, demand for properties in Petaling Jaya has held steady, reflected by the slight increase in the overall asking price of RM659 psf during the review period compared with RM656 psf in the preceding quarter,” Wong notes.

The increase in asking price is attributed to Surian Condominium’s 3-bedroom units with built-ups of 1,400 sq ft. Its asking price rose 4.9% to RM715 psf during the review period from RM680 psf in 1Q202