The Meritz @ KLCC

Meritz is one of the lowest density condominiums in the KLCC area. It is the first ones of Wing Tai Asia's projects in the KL city center, located opposite KLCC in the middle of Jalan Mayang. In my opinion, despite it's prominent position less than 800m from the doorsteps of KLCC twin towers, Meritz's location is really not that perfect today. It is sorrounded by empty prime plots which will see some major constructions soon. The sluggish economy is putting some of these plans on the back burner but once it picks up again, Meritz will be blanketed by sky scrapers.

For a start, the much prized KLCC view will be blocked by Wing Tai Asia's own office block development. However, I do hope that Wing Tai consider constructing an access to Meritz via this development. It will shorten the walk to KLCC by at least 600m and add value. On the other side of Meritz is the mega development by UMLand to be called Lavender Night. Once built, these projects will add value to Meritz and develop the sorroundings of Jalan Mayang. I predict this will cause the price of Meritz to increase by at least 50%. However, during the construction, it will be a nightmare.

Despite the uncertainty of its' sorroundings, I actually like Meritz. More so since it is a low density development. Each floor only has 5 units of 2 or 3 bedroom units roughly sizes ranging from 1000sf to 1600sf. The layouts are actually quite nice, each floor has a nice, bright and spacious landing. There are less than 100 units in this building. The layouts of the interior are functional with ample storage space and allocations of a separate kitchen area which consists of a wet and dry section. This is ideal for long term living. The only kink is the bathrooms which have no windows. Still, Meritz's individual layout certainly beats Idaman Residence flat out.

The facilities are 5 star. It has a small swimming pool, sauna and a nice gym. With only 99 units, I would imagine the facilities will be well preserved and from the looks of it, they are well maintained. The maintainence fees at RM0.45 psf is quite standard for this area although it sums up to around RM500 per month for the smallest unit. Still better than Marc Residence, I guess.... And best of all, the residential title means that they are enjoying lower utility rates compared with Marc, Seri Bukit Ceylon, 231TR and other serviced apartments.

The most desirable units are those facing Phileo or the Australian High Commission. Those facing the other side, i.e. Jalan Tun Razak may suffer from the noise. And the most drab of all, none of the units will be able to escape some kind of construction work in the near future. The price at RM1000psf, definitely over RM1 million each reflects the value of the place. I understand it was launched at around RM700psf about 5 years ago. At today's economy, I actually found 2 fire sales just below RM1 million or approximately RM880psf. Due to the location, most (> 90%) of the units are rented out at between RM5000 to RM9000 per month. The higher end are those larger 3 bedroom units.

Despite an over-built KLCC area and will be even more over-built in years to come, I think Meritz will stand on its' own due to the low density and the high quality tenants.

Marc Residence @ KLCC

Marc Residence entered the KLCC market around 2004/05, at about the same time as KL Parkview and Meritz. I think it totally changed the property landscape in the KLCC area which was dominated by older apartments such as Kudalari, Crown Regency, Sri Kia Peng, UBN Apartments, Hampshire etc... Marc was launched 2 years earlier at around RM600psf and when completed was transacting heavily at around RM1000psf. The timing is superb, at the very peak of the property boom. Subsequent entrants such as Idaman Residence, Hampshire Residence obviously stood to benefit but unfortunately entered at the wrong time. However, the benchmark has been set.

Having said that, today we have unusual times. Some KLCC owners have been trying to sell at below market price and we have seen units trading or trying to trade at RM800psf or below. How low will it go further, we don't know... but the fact is, most of these low value units are the less desirable units. Marc for example, have a lot of these.

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Marc consists of 2 blocks which have a range of units from 493sf studios to more than 3000sf units. These units are facing Kirana serviced apartments, the Frasers Suite, One KL or the Glomac office construction site. The KLCC view has all been blocked by One KL but they are still the more desirable units. Obviously the worst are the ones facing Glomac. While they are currently facing the dilemma of noise from the Jalan P Ramlee entertainment outlets, the Glomac construction will add to their woes once the piling starts. Then, Glomac climbs up to 40 floors which means that these units will be completely blocked of any natural light considering that the distance between Glomac and Marc is very close. Hopefully, this means the Jalan P Ramlee noise will be blocked by the new Glomac tower.

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Naturally, these are the worst units in Marc residence and they are trying to trade at below market price today. Those with other views are still stubbornly trading above RM1000psf or else the owners are not selling since they can be easily rented out for RM3000/month for the studios and up to RM8000/month for the 3 bedroom units. However, there are some very oddly shaped layouts being offered slightly below market. Oddly shaped... for example, they've got extremely small master bedrooms and the back room is unusually larger (I would consider the room with the best view and attached bathroom as the master bedroom). I wonder what is going on in the minds of the architects.

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I have taken on a keen interests in the 2 bedroom units in Marc and recently been shopping around. But unfortunately, those being offered for below market price currently are those non desirable units facing Glomac and of course those odd layout units. This goes to show that in property investment, it is not just location, location, location... It's also Layout and View! So, I would revise this oft-spoken slogan in property investments to be Location, Location, Layout, View! The 4 most important criteria. For example, you don't want to have a non-functional layout as described and also no bad views such as noisy places, septic tank, grave yard, electric pylon and highways!

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Facilities-wise, Marc is probably the best in this area for a mixed development of small, big and commercial units. The density ensures that the facilities and utilities are well-used. There are 2 large swimming pools, one of them is probably the largest in the KLCC area. There is a "hanging jacuzzi" which hangs off the front porch of the building. The gym is well equipped, so is the library and playroom, a well-stocked tuck shop and tennis court. No other apartments in this area can boast of such facilities. There are 2 large lobbies, one for each block and the fittings are luxurious in line with the status of Marc Residence. But of course, with these comes the cost... the maintenance fee per month is RM0.65psf, which means that for a 2 bedroom 867sf unit, it's RM563.55 per month!!

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The high maintenance is also due to fact that this is a commercial titled property. My experience with such properties have been a mix of good and bad. The bad of course you are paying commercial rates for everything from TNB to Indah Water rates. Your maintenance fee obviously reflect the commercial status as well. Next door to Marc Residence is the Ascott Kirana serviced apartment. The Ascott group has been doing particularly well here and also at the sister property at Somerset. So, Ascott has also taken some units in Marc. The association with the Ascott group has done well for the associated buildings in KL. Strangely, Suasana Sentral at KL Sentral terminated their association with Ascott and it seems they are going down to worse in terms of value.

I appear to have lost the pictures I took at Marc Residence, so will try to find them and post them in here.

Somewhere in Jalan Gurney

Here are more on niche developments - 6 units of 3-storey link houses in the heart of Kuala Lumpur at Jalan Gurney, 2 of them corner lots. Can't get any more niche than that...

The view from the actual location, i.e. from the 3rd floor of one of the units, you can see that KLCC is not really that far away. In fact, it's just about 2km and one would find it possible to walk there from here. The entrance to this development directly fronts Jalan Yap Kwan Seng which is separated from Jalan Gurney by the busy double decker Jalan Tun Razak.

The back of the houses is the Felda office and a couple of old bungalows belonging to some government departments. There is a possibility that these may be torn down in the future.

Despite being link houses, these are large houses. Each one of them has 7 bedrooms. The ground floor consists of a very large living room with adjoining dining and dry kitchen. There is also a wet kitchen and a maid's room and bathroom. The 2nd level has 3 bedrooms, each one of them with its' own private baths. Level 3 has 3 more rooms with ensuite facilities. The front room from which the top picture was taken has a sliding door and balcony - it would work well also as a kind of office or study.

There is a sky-roof in the middle of each unit. Basically, the rooms up above have these pretty wooden kampung style windows that opens out into the living room down below. It is a very nice concept and it is possible to actually have a little garden or fish pond inside the house in the middle of the living room. We were not allowed to take any interior pictures, so we have to make do with a picture taken from outside one of the corner lots to demonstrate this concept.

Judging from the exterior design (...and interior too), it is very likely this developer is targeting the older generation of buyers. Possibly those who are past retirement and looking for a house big enough for the whole family, grand children and all. The price is also not too steep considering it is freehold and location in the city center. Each of the intermediate costs just above RM1 million. The corner units were sold out when we got there and understandbly since it is only about RM200k more than the intermediates. These 2 corner units are probably the only ones worth having.... more than 1 month after our viewing, about 2-3 intermediate units are still available.

Despite targeting old people, I think the developer would have done better to invest in a better, more modern design. That is to use more glass and natural wood for the facade.

The East Perth Neighbourhood - a picture tour

Picture above: Panoramic view of the waterways in front of East Perth

Picture above: East Perth is not a gated community. There are public parks within the area with barbecue stoves - you just need to bring your meat and power it up. No need to pay.

Pictures above and below: Some of the townhouses at the waterfront up for sale

Pictures above and below: Some waterfront apartments with chic cafes at the ground floor

picture above: Probably the last parcel of empty land in East Perth up for development

picture above: The back alley of the waterfront townhouses with garages

Picture above: Perth city skyline as seen from East Perth

Feature - Perth, Australia

Perth is a small city, with about 1.5million people. That's half of KL. There seems to be plenty of land in Australia, Perth included. Hence, everything seems ultra low density from all angles. Most people live out in the suburbs of Perth, as shown in the map.

As with most cities in Australia, Perth has one of the world's best affordable public transport. At the same time, cars are cheaper compared with Malaysia and petrol if compared dollar to dollar is more affordable in Australia. Yet I do not find any unbearable traffic jams in Perth during the rush hours. 

Surprisingly, despite having abundance of land at cheap prices comparable to Malaysia, most people in Perth especially the locals tend to rent. The majority of those who do buy would start with purchasing a plot of land in their choice locality, which is typically about 3000sf - 8000sf. Then, they would go to a builder who would give them a selection of designs which they will then modify a little before building their dream home. Typically, the design includes 3 - 6 bedrooms, a living room, kitchen, dining, garage, study area and a 2nd living room in the form of a games room or theater room.

picture above: A typical dwelling out in the suburb of Lathlain

picture above: Most of the suburban dwellings start off as a blank piece of land

Picture above: Typical suburban homes have wide roads, with a pedestrian and bicycle lane. Despite each household having an average 3 - 4 cars, there don't seem to be any parking problems

In some cases, though rare but becoming more common, a developer would section a piece of land and pre-build a number of houses for sale. Even more uncommon, the developer would build an apartment. Most people in Australia, Perth included do not normally buy or live in an apartment. Unless of course, the location is just too precious such as the CBD area or other lifestyle locations. Examples in Perth are Kings Park, East Perth, Ascot, Subiaco and Northbridge. In many cases, these apartments actually cost more than the landed properties due to the location.

picture above: Views alongside Adelaide Terrace, a choice location in the CBD for expatriates

The pictures above show a niche development of the Old Swan River Brewery. Once a brewery house, it has been converted into luxurious office complexes, chic boutique condominiums and restaurant with a beautiful river frontage

pictures above: Example of a ready-made home, these are usually quite high quality and require little or no renovations before moving in. The bungalow homes above in the suburb just 10mins drive from the city center costs AUD$500k each

For investors like us, there are 2 ways to buy into an Australian property:

1. Sub-sale properties - typically, an agency is appointed to auction the property to the highest bidder through an open auction. Open houses are organized at stipulated time and days before the auction for interested bidders to view the property.

picture above: An estate agent welcoming visitors to the open house. I was not at all surprised to see most visitors are of Asian origins, mostly from SEA and mainland India

2. Buy-now-build-later properties are usually bought by investors hoping for a capital appreciation, because it only requires a 10% deposit and pay nothing else until vacant possession.

In the past 5 years, Perth has seen a property boom never seen before. Homes prices apparently shot up 100% in most areas and in the recent recession, we are starting to see some prices coming down but not yet by a lot. Typically, property investors are looking at about 5% returns on their investments and maybe even lower than that in the suburbs. So, for a AUD$500,000 home, they are collecting about AUD$2000/month. AUD$500,000 is about the price one would pay to raise a 3-4 bedroom house in the suburbs. These homes are typically bungalows with land and with very high quality construction, hence would obviously be much better value compared to what we get here in Malaysia. In fact, comparable housing quality in the Klang Valley are places like Sierramas, Damansara Idaman and Desa Park City are all looking at an entry level of minimum RM1.5million for a Semi-D (not even a bungalow!!). These are not even in the location within 10 minute drive of the CBD. And even at that RM1.5million entry level, one need to spend at least RM100k on quality fittings such as kicthen cabinets, wardrobes etc. In Australia, the builder packages all that.

Anyway, talk until the cows come home, 5% is very bad yield by our standards. But there are pockets of secrets where close to 10% yield is achievable. I am not talking about the early batches of migrants who settled in Perth and managed to buy 5000sf bungalows in choice locations for under AUD$250,000. These people made money. A cousin bought a 2 bedroom apartment in West Perth for AUD$70,000 and now collecting AUD$1000 rent per month. That was more than 5 - 8 years ago. What can we expect today?

I observed that properties in student areas still command strong returns and may well be good investments for Malaysians, especially those with kids. These are suburbs around reputable universities such as Curtin (e.g. Bentley, Como etc), Murdoch (e.g. Melville) and University of Western Australia (e.g. Nedlands, Crawley). Properties within 1km radius of these schools are attracting rental of about AUD$150 to AUD$250 per room per month. Take the median rung, in a typical 5 room house would earn the landlord AUD$4000/month which means for an investment of a typical AUD$500,000 house, a 9.6% yield. Even at slightly lower returns, for Malaysians who will soon have their kids studying in these schools in Perth and subsequently may migrate there themselves, this would be a very strong case for investment. 

Of course, since most people are thinking along these same lines, properties in the academia suburbs mentioned are really hard to come by, empty land is almost non-existence and hence only sub-sales are available. I was able to pick out a few in the classifieds of the West Australian newspaper which are worth considering. 

In the next feature after this article, I'll focus on East Perth, which is the equivalent of our Damansara Heights or Bangsar but of course much more organized and picturesque. East Perth is a well-sought after area of the rich and famous, located just minutes from the CBD area with beautiful parks and water frontage. Most Australians care about park or water frontage bit and they are not just valuable, these properties also attract a lot of attention. Frankly, at today's prices and rental, East Perth is not the best investment in our mind but however one needs to take into consideration that there are almost no more available land in this area. Hence, in the months to come especially if the recession deepens, if a good buy comes along, one has to consider East Perth.   

What do you think of Perth?

In the past decade or 2, thousands of Malaysians have migrated to Australia. Mostly for their children's education apart from economic reasons. I believe in the years to come, thousands more will emigrate if this government is going to continue screwing up our education system.

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Australia is a big country, with multiple centers of economic development, unlike Malaysia or Thailand where everything is centred around Kuala Lumpur or Bangkok. Last night I asked a fellow property investor in Perth, which city would be the best bet to invest in Australia? She replied that in terms of economic development, whatever happens to Sydney will replicate in Perth despite Sydney being a much larger and higher populated city.

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Like KL, the past few years we have seen major appreciation in property values in Australia. Rent has increased too. Until recently, this upward climb has somewhat halted and we are now seeing the beginning of a decline. The Aussie Dollar has also depreciated more than 25% in the past few months against the Malaysian Ringgit. Not that the Ringgit is performing well, in fact it hasn't. So, this goes to show how badly impacted the Australian economy is from this global recession.

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Does this mean it is a good time to invest in the Australian property market? Certainly few years ago, if one has invested in Australia, one would have made a lot of money on 2 fronts:

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1. Buyers generally pay a 10% deposit upon signing the SPA and pay nothing until the building is completed in 2-3 years time. Back then, property prices were on a steady upward climb and one can sell the property upon completion with a tidy profit without even having to fork out the remaining 90% - no bank loans, no severance penalties, no headaches

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2. The Aussie Dollar (AUD) was also on a steady upward climb. While one paid the 10% deposit on an exchange rate of RM2 per AUD, at the very peak the AUD reached RM3.50. Hence the profit from the sale plus the deposit are repatriated at a higher exchange rate.

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For many reasons including ones above, in my opinion Australia remains a good investment destination for properties. One can look at the prospects from these 3 angles:

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1. Australia has some of the world's best universities and tens of thousands of foreign students are enrolled each year - hence the demand for students' accommodation is always steady and constant. Obviously, one can invest for their own children's education as well - better than paying somebody else rent for the 3-4 years of studies which can amount to a tidy AUD7800 per year @ AUD150 per week. If your children study for 4 years, the savings from accommodation could amount to over AUD30,000. You can also sublet additional rooms to other students and then keep the property for rental income or sell it at a high profit upon your kid's graduation. Like Malaysia, it is highly unlikely that properties near to universities will depreciate in value (unless you got them at a very unreasonable price in the 1st place).

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2. I've been here for 3 days and all my wrinkles are gone... It is certainly a very nice place to live with very few frustrations that you get in KL. There are rolling hills, green park land and scenic water ways all calling for some sort of recreation even in between working hours. One can walk safely down the road without any hassle such a broken walk ways or smelly illegal dumps. The quality of life is certainly there for those looking for a place to retire. In fact retirement homes and villages are a big sell here, with hundreds of thousands of well heeled immigration for that purpose.

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3. Australia is also a pleasant place to work. This 3rd reason is probably less prominent lately with thousands of retrenchments each month. However, if you are coming in here with business ideas and capital investments, I am sure the government would welcome you with more than an open arm. The economy is bound to recover one day, with opportunities for everyone...

For what reasons would one choose Perth?

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Well... It is only 5 hours by plane from KL, the nearest point in Australia from Malaysia... (cos you don't really want to be in Darwin..). In the next bit, I will go into more detail of what we can expect to see in Perth. Stay tuned and please leave your comments...

Rental Meltdown in KLCC

Following with the recession and an over-built property market, are we now witnessing a rental meltdown in the city center? Back in the 90s, we would normally measure investments by percentage yield, and the norm back then was a 10% yield would be average.

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Back then, the star investments were in places like 202DC, D'Mayang, Mayang Court, Menara Bukit Ceylon, Sri Raja Chulan etc.... some of these places are mentioned in this blog. Selling price back then for a 3 bedroom unit was around RM300,000 to RM350,000, and renting for between RM2500 to RM3000/month. At the peak of it, some even fetched up to RM6000 rent. Really great for these investors.

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These days, one is looking at spending around RM750psf to RM1000psf for prime properties in the city center. That means anything from RM250k for a studio to over RM1million for larger units. On the lower scale in KL city center, dominated by the likes of Maytower and Casa Mutiara, the average rent for a 450sf studio is about RM1200/month. That's hardly 6% returns.

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On the other end of the scale, we have those luxurious units in places like Stonor Park, K-Residence, Park Seven etc... these are peddling for well over RM3million and rental is about RM10k to RM15k/month. I would say these are bad investments since the cost of furnishing a unit for a tenant who can afford that kind of rent would be very high, not to mention the much higher maintenance fees for the larger sizes.

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On the mid range, I was a not at all surprised when I opened the classifieds last week to see 2 bedroom 1000sf units at the Meritz, Idaman Residence and Marc now going for RM6000 - RM7000. This is probably not too bad going for Meritz or Marc since the first time buyers probably got them for around RM600 - RM700psf. However, a RM1million unit at Idaman Residence is now advertised for RM4000/month. The smaller 900sf units are going for RM3800/month. No doubt there has been cases of desperate investors trying to off-load 1000sf Idaman Residence units at par value ... RM800k? And not to mention 231TR at RM650psf. But the rental return still does not justify.

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With such low rental, is there still a market? Many units are still vacant. There are less than 10 units occupied now at 231TR despite being handed over in early January. Apparently there is only 1 successful subsale, mine. Owners who invested around RM500k for a 2 bedroom unit in 231TR are trying to look for tenants willing to pay RM3000/month. Considering the monthly installment at RM2600 + maintenance fees RM350... that's just almost breaking even - if one can find a tenant, that is...