Has the KL prime property market slowed down?

Several estate agents I had a chat with recently revealed that the property market has indeed slowed down. Most units transacted in the subsale market were apparently done more than 10% below "market rate". How do we determine what is the actual market rate? Take Marc Residence for example. It was launched at around RM600psf and in the height of the speculative market reached RM1500psf. A few estate agents handling Marc has told me that nobody has been able to sell at this "market rate" in these past few months. There are in fact some buyers out there but they are investors looking for cheap sale.

The tenancy market has of course followed this trend. Despite their prime locations, Marc and almost neighbour, Parkview has many vacant units. Aside from realtors' feedbacks, my measurement technique is normally taken at night between 9pm to 10pm with a glance up the building to see how many units have their lights on. If less than 50%, it's not very encouraging. This is certainly true at the moment. Another test would be the classifieds section. The most active one being the Star classifieds (http://classifieds.thestar.com.my/). We've been seeing a long list of Parkviews and Marc Residences in the listings. True enough that these 2 properties have always attracted a very long list in the classifieds. Previously because it was lucrative. Agents told me they were selling like hotcakes and sometimes 5 or 6 agencies' posting represent a single owner. However, one can't help but notice that lately the same listing been there weeks on end without any buyers.

One agent revealed that his one week posting in the classifieds for Seri Bukit Ceylon only attracted 2 calls. Both from co-agents who represent buyers on the lookout for a cheap sale.

Now for the great economic debate. Are we or are we not in recession? Is this 1997? Recession or no recession, my experience is that this is indeed a very difficult period for us property investors. Difficult because, with the ever dwindling pool of buyers, it takes us longer to sell and we are facing more competition, hence lower premium. Without contradicting myself earlier, it is also more difficult for us to buy because interest rates are still low, most owners are still holding on to their high premium. So while some transacted units saw huge discounts, in fact not many units are beign transacted at the moment. I hold the personal opinion that it is a bad idea to hold cash at the moment with inflation on the rise and interest rates so low. So what to do with the cash? And to buy in to any prime property at a bargain is difficult at this stage for the reason mentioned.

Bukit Ceylon

My first focus will be on Bukit Ceylon. Partly because I live here and partly also because I made my 1st investment here 10 years ago. In my opinion, there has been too much hype on the 1km radius of KLCC. Bukit Ceylon is not KLCC, in fact it is just outside the 1km radius ring. It is a hidden jewel and for this reason, many investors here still talk about 10% returns on rental yield. But I don't think this is for long... Until recently (I am talking 2007), one can get prime 5-star property in Bukit Ceylon for just over RM600psf. Now it is hitting almost RM900psf and there is talk that the to be launched project by Wing Tai Asia along Jalan Ceylon will be peddled for nothing less than RM1000psf. Why this sudden surge? What makes Bukit Ceylon so attractive?

I'll post my opinions later but would also appreciate to hear what all of you say.

Before we go any further, I would like to introduce more of Bukit Ceylon. Referring to the google map above (click on the map to get a larger view), Bukit Ceylon is actually a hill bordered by Jalan Bukit Bintang, Jalan Raja Chulan, Jalan Sultan Ismail and Jalan Pudu. It fringes on the glamourous and prestigious (Sultan Ismail/Bukit Bintang/Raja Chulan) and the notorious (Pudu). Within this enclave, you will find a very very diverse demographic from the rich and famous (the Sultan of Pahang has his palace here), the expatriates right down to the immigrant workers. There are premium condominiums, 5 star hotels and also ghetto-style walk-up flats. Even tenants in the same condominium can consist of senior executives of MNCs, right down to the tens of restaurant workers cramming into a single bedroom unit. I have personally seen this.
When investing in Bukit Ceylon, one has to be very selective. Not all the properties, even the supposedly high-end ones are in demand. Most long term investors, including myself would prefer freehold rather than leasehold properties. The leasehold ones here probably have less than 70 years of lease left in them... (well in the range of one's lifespan if starting young). City Gardens, Angkasa Impian 1 and Angkasa Impian 2 are the only 3 blocks that are leasehold.

City Gardens would probably serve well for own stay as it is located right on the quiet part of the hill and the low density spread. However, a fatal case where a lady fell from the only highrise block in the complex has not been very good publicity for the place. There is even word that she was thrown off her balcony by her estranged husband... just a rumour...

picture above: City Gardens

The 2 Angkasa Impians would probably do well for investors still hunting for that elusive double digit returns, if one doesn't mind the leasehold ownership. A one-bedroom unit here can fetch a minimum RM2000 rental and as high as RM3500/month. Generally for buyers, it costs 30% - 40% less than the neighbouring freehold properties. But there is an exception. Angkasa's immediate neighbour is freehold Mutiara Villa. It is still possible to get a smallish unit here for less than RM250,000 and earn almost RM2000/month rental despite the so-so quality of maintenance. There is much demand here and very difficult to find a seller. But some units perform better than others. Much depends on the unit's view, layout etc... with those facing KLCC and Menara KL (Telecom Tower) doing better. The reason for Mutiara Villa's success and hence lack of sellers is the fact that there are few condos now in this prime area at such relatively low rentals. In fact everything else in this area, we are talking about RM3k and up.

Right in the center of it all are the 2 competitors, Menara Bukit Ceylon and Seri Raja Chulan. Both offers 3 bedroom units with minimum size circa 1500sf and literally at the doorsteps of expats drinking holes and feeding ground of Changkat Bukit Bintang. The 2 buildings are surprisingly well maintained despite their age. The minimum rental here is at an affordable RM3500/month and can even fetch RM5000/month for those well done up ones. Asking and transacted prices are no less than RM600k and I heard of one transacted at RM750k recently. Seri Raja Chulan is lower density with only 4 units per floor while Menara Bukit Ceylon has 6 units per floor. Menara Bukit Ceylon is better positioned and those selling at a premium are facing KLCC and Menara KL. Avoid those facing Menara Bolton as there are plans to demolish the building and you'll be facing a construction site soon. For Seri Raja Chulan, avoid the units facing the walls of neighbouring Somerset Seri Bukit Ceylon and Downtown condomonium as you will hardly get any natural sunlight. Being built in the 80s also mean that they have very low ceiling despite their large sizes which makes one feel claustrophobic. I could literally touch the ceiling if standing on tip toe. Despite that, you will hardly find any sellers. And hardly anyone advertises for rent too as it goes by word of mouth and gone within days.

For those with a much lower budget, yearning for a low density freehold property in this location can either go for Mutiara Villa or Downtown condo. The latter is situated right beside Seri Raja Chulan but it does not compete. In fact, unlike Mutiara Villa, Downtown condo is in a slippery slope to failure. 2 sides of it's wall is litterally face to face with other buildings while the third which is currently facing a parking lot will see a huge construction. The maintenance is also very bad, I think a little worse than Mutiara Villa. It's facilties are no longer functionable except for the very tub they call a swimming pool.

At the top of the pecking order is Seri Bukit Ceylon. For a small development, it certainly multi-functions. The ground floor to the 3rd floor is commercial but some owners of the duplex offices have converted their units into chic lofts for residential use. 4th floor have some really good facilities, albeit a small-ish swimming pool but very under-utilized... which is good. 5th to 11th floor houses the 4-star serviced apartments owned by Somerset, a Singaporean hospitality group which also runs Ascott and Citadel brands throughout the world. The rest of the building consists of 4 exclusive duplex units sorrounding a roof top garden on the 23rd floor and 132 privately owned units of 2 bedrooms and 1 bedroom units. Some of the private owners furnish and let out their units to Somerset for a guaranteed return. Since it's launch in 2002, private owners have enjoyed a 110% capital appreciation and these first time buyers are getting almost 20% in rental yield. Even sub-sale buyers today can still enjoy double digit rental returns with 2-bedroom units most in demand and I know of at least one unit fetching RM8000 rental per month. Seri Bukit Ceylon is expected to maintain it's pole position until the completion of One Residency later this year 2008. The developer of Seri Bukit Ceylon, UMLand also owns the plot opposite and promises a project to rival all in the future.

picture above: Seri Bukit Ceylon

Besides Seri Bukit Ceylon, the other commercial titled residential property in Bukit Ceylon is Bidara 38. Unfortunately for Bidara, it has never really taken off. Partly due to it's unfortunate location which is facing the aircond compressors of Istana Hotel. Bidara also suffers from poor workmanship, bad layout designs and bad feng shui. It also comes with no parking - on top of the expensive maintenance fee, one has to pay RM150/month for a parking lot. However, the most desirable units here in my opinion are the 2 corners - one just above the swimming pool and the other corner facing KLCC. Go for the high floors or else the smell of the rubbish dump below and the noise from Istana's massive air conds may get to you.

picture above: Bidara 38 suffers from parking problem

Lastly, deserves mention is Menara Antara. Probably the highest condo in the city center. It is located almost at the top of Bukit Ceylon. Unfortunately, there is little I can write about this property as there has been no opportunity for me to view it from the inside due to hardly any sellers. The last 2 opportunities, the units were hardly in the market for 2 weeks before being snapped up. If one is willing to pay RM380k for a 1 bedroom unit which gives you only RM2000/month must speak some wonders about this place. I am very curious and would appreciate any readers' comments about it.

This is just the beginning

Welcome to my blog. There are at least a hundred blogs and websites about real estates in Malaysia, but few are truly independent that provides unbiased opinion and feedback on the available choices of investments in Malaysia. I would like to present such platform. Although my views may sometimes seem biased due to my vested interests in the form of ownership in certain projects, please feel free to provide a counter opinion. To be fair, I will certainly highlight if I have any vested interests in my blog entries but I will endeavour to present only facts and truths.

I have a day job which is not property related. I am a wage earning employee. Yet, for the past ten years or more, I have been dwelving in real estates. Real estate to me is not just an investment, it is also a passion. I hope you join me to explore and review the many interesting projects and have fun along the way.

Please feel free to post your comments, whether they are in agreement with my views or against. I welcome all types of comments and opinions, but please do not write anything seditious, racist or rude.