Sunday, October 14, 2007

Are KLCC condos overpriced?

IS the condominium market in and around the Kuala Lumpur City Centre (KLCC) area overheated and over-saturated?

Depending on whom you are talking to, the answer is yes or no. If you are asking a gung-ho developer which has just launched a very high-end condominium development, he or she will urge you to buy now, in the firm belief that prices will appreciate further.

There is plenty of room for capital appreciation, as land is scarce in the very prime KLCC area and prices are a fraction of those in Singapore, the US, Hong Kong and Britain.

KLCC, with its imposing Petronas Twin Towers, Suria KLCC shopping centre, Mandarin Oriental Hotel and several tall Grade A office buildings and condominiums, is Malaysia's “Shinjuku” (Tokyo's skyscraper sub centre).

However, if you ask some industry experts, they may warn of an oversupply situation looming in the horizon. “Dark clouds” have been gathering over the horizon of late with the US subprime loan market debacle, the weakening ringgit and the stock market slump likely to further dampen confidence in the property market. Will there be a credit crunch in Malaysia?

I feel that the price spiral in the very high-end condominium market has been too sharp, too soon. In less than two years or so, KLCC condo prices per square ft (psf) have more than doubled from RM1,000 psf to RM2,000 psf for the top-end project.

When word got round that the price of Datuk Chua Ma Yu's One KL had hit RM1,600 psf, the situation spread like wild fire. Then came Four Season's RM2,000 psf. Suddenly everyone wants to jump on the price hike bandwagon. Land prices suddenly skyrocketed.

Magna Prima Bhd revised its price upwards from a range of RM3.1mil to RM8mil to a new range of RM3.9mil to RM11.9mil for its six-star 78-unit Avare condominium at the KLCC Park! Others coming on stream are the Troika, The Binjai, Marc, Ampersand@Kia Peng and K-Residence.

More and more new players are zooming into the area and, with spiralling prices of very limited bungalow land, only the bold and bountifully cash-rich developer can hope to zap up the pricey land.

Bukit Kiara Properties Sdn Bhd is eyeing two pieces of land in the KLCC vicinity while OSK Property Holdings Bhd is said to have acquired about 28,000 sq ft of land in the Jalan Yap Kwan Seng area to build a high-end condominium.

Further off in the Jalan Madge-U-Thant area, Nam Fatt Corp Bhd has a proposed high-end condominium called Gallery@ U-Thant there. The 50-unit project boasts one of the largest unit sizes in the vicinity with 3,200 sq ft to 4,555 sq ft for standard units.

GuocoLand Bhd (a member of the Hong Leong group) is reported to be paying about RM810 psf to buy the Oval Serviced Apartments being constructed along KLCC's Jalan Binjai. It is said to have set a new benchmark price for an en bloc purchase in that area.

An artist’s impression of the Crest Jalan Sultan Ismail
One developer told me that foreigners were coming in to buy the high-end condominiums. “There is a South Korean company which is keen to buy a whole block but its target price is around RM1,300 psf,” he said.

Another very prime area to watch that has good potential for high-end condominiums is the small hill at Cangkat Kia Peng where some bungalows enjoy a good view of the KLCC area.

With prices of KLCC condominiums and serviced apartments reaching new highs, developers of some new high-end condominiums on the KLCC fringe are smiling, as their prices are much more affordable – more than 50% cheaper.

For example, Crest Worldwide Resources Sdn Bhd, which is developing the RM357mil Crest Jalan Sultan Ismail comprising a 44-storey residential tower and a 26-storey corporate tower, is pricing its luxury residences with sizes between 616 sq ft and 7,593 sq ft (super penthouses) from RM650 psf to RM900 psf.

According to Khong & Jaafar Research, The Crest Serviced Residences is one of the best value-for-money investments in the KLCC precinct where valuations obtained from various valuers placed the prices of high-end serviced residences in the KLCC precinct at a minimum of RM700 psf now and they are rapidly moving towards RM1,000 psf.

“The prices for The Crest units are expected to be RM1,000 to RM1,200 psf upon completion, depending on the size. On the completion date, the gain is expected to be more than RM250 psf,” it adde

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