KLANG VALLEY 'S 2004 RESIDENTIAL MARKET REVIEW
by Rahim & Co Research Sdn Bhd
2004 is graciously coming to an end with strong economic performance mainly propelled by the growth in the manufacturing and services sectors. Higher commodity prices, rising export earnings and growth improvement in the private investment sector have also contributed to the sterling health of the local economy. GDP growth in first half of the year expanded by 7.0% in 1Q2004 and 8.2% in 2Q2004. Although lower growth was registered in 3Q2004 at 6.8%, the outlook is very much optimistic to meet the official target of 7% for the whole year.
In addition to strong GDP growth, loan indicators from the banking sector showed improved business activities and strong domestic spending in 1H04 (January-June 2004). There were more loan applications, approvals and disbursement in 1H04 compared to previous corresponding period. Other economic indicators also showed positive signs with unemployment rate remained unchanged at 3.5% and higher demand for employment with the expansion of private investment. Consumer Price Index (CPI) has remained stable for the first seven months in 2004 at 1.1%, one of the lowest in the region.
The positive economic indicators had augured well for the residential property sector. In addition, government incentives such as stamp duty, real property gains tax exemptions and relaxation of FIC ruling on the purchase of property exceeding RM150,000 by foreigners, continued to aid the sales of residential properties. Overall property transactions increased by 20% in first half of this year and the residential sector was the major contributor to the growth in property market, accounting for 65% of total transactions.
Property Market Review
The total residential stock in Klang Valley stood at 1.18 million units in 1H04; Wilayah Persekutuan Kuala Lumpur at 306,854 units and Selangor at 873,918 units. Of the total stock, 2-3 storey terraced house represented 28% of the existing supply followed by condominium/apartment (16%). There was an increase in stock compared to the previous 2H03 because of higher supply of townhouse, single storey semi-detached house and double storey semi-detached house located mainly in Selangor, signifying a change in housing preference, reflecting the contemporary lifestyle of the urbanites. Furthermore, the phenomenon of urban sprawl is observed especially in the growth areas of Shah Alam-Sg Buloh corridor and the southern corridor (towards Putrajaya) exhibiting signs of suburbanisation in Klang Valley.
The following charts show the half-yearly comparison for residential transactions activities in Kuala Lumpur and Selangor.
Volume, Value and Value Per Transaction of residential properties transacted in Kuala Lumpur and Selangor (1H03-1H04)
(Source: NAPIC 1H2004)
Half-yearly comparison between 1H04 and the previous 2H03 showed that volume of residential properties transacted in Kuala Lumpur decreased by 6% while value of transactions increased by 6%. In Kuala Lumpur , during IH04 condominiums and apartments recorded the highest transaction activities, accounting for 35% of total transactions. In Selangor, both volume and value of transactions showed an upward trend with an increase of 5% in volume and 7% increase in value. The most popular transacted property was two storey terraced, forming 35% of total transaction volume.
Half-yearly analysis of 1H04 and 2H03 for value per transaction also showed an upward trajectory trend. Both Kuala Lumpur and Selangor recorded increase in value per transaction from RM301,608 to RM339,581 and from RM216,259 to RM221,548 respectively. The increase can be attributed to the higher value of properties transacted during the respective period such as upmarket condominiums.
Prices and rental values of residential units in the secondary market are mostly consolidating except for some established neighbourhoods such as Taman Tun Dr Ismail, Bandar Utama and Taman Setiawangsa which continue to indicate a rising trend. Meanwhile, up-market condominiums in trendy areas such as Bangsar and Mont' Kiara also showed attractive capital appreciation and rental rates while condominiums in Section 16 Petaling Jaya on the other hand, were generally indicating static growth in rental rates but declining prices ranging from 6% to 7%.
Planned supply of residential properties for Kuala Lumpur and Selangor as at 1H04 stood at 177,593 units with bulk of the planned supply i.e. 35% or 62,675 units being condominium/apartments. The growing pattern of strata-titled properties is anticipated to continue in the next 3 to 4 years mainly concentrating in areas such as KL city centre, Mont ' Kiara and Segambut. Upmarket condominium launched early this year was Dua Residency and a few more followed suits in the second half of the year such as The Meritz, CapSquare Residences and 2 Hampshire. Most of these projects reported commendable take-up rates amidst some pessimistic views that the market is getting a bit too crowded. In Selangor, the bulk of new schemes are mainly terraced houses in active growth areas such as Damansara-Kepong, Shah Alam 'Guthrie Corridor' and western part of Klang. Some of the notable new township developments include Bandar Aman Perdana and Bandar Setia Alam.
Aggressive marketing and competitive price are nowadays insufficient in luring prospective purchasers, therefore developers are working hard to project refreshing development concept, and convenient accessibility while highlighting a contemporary lifestyle and beautiful landscape.
Competition is indeed stiff, thus, developers are inevitably challenged to create innovative products in order to meet market demand and capture a larger market share. Amidst the fierce competition, new concepts and ideas emerged such as gated community for landed strata-titled properties, variation of terraced houses and hi-tech smart homes as seen in Desa Park City and some housing developments in Putrajaya i.e. Precinct 9, Precinct 11 and Precinct 16.
Gated community is a concept previously unheard of for terraced houses as only bungalows that were gated. These days it is becoming more socially acceptable while developers are getting more serious in introducing significant product differentiation to create the extra competitive edge. Some of the notable examples are Desa Park City and Mutiara Damansara where terraced units were gated for privacy and exclusivity.
Where choices are aplenty and prices are competitive for 2-3 storey terraced houses, developers will need to create different concept to attract house purchasers. Therefore, good sales and marketing strategies are becoming more essential, hence, it is no surprise that some developers are offering incentives and freebies such as built-in wardrobe, kitchen cabinet, landscaping, upgrading of finishes, provisions of electrical goods as well as legal and stamping fee.
Other developers such as YTL offered product differentiation that was niche in meeting the gap in the Puchong market. The gated Lake Edge courtyard homes was launched early this year, setting a significant benchmark in Puchong locality for an inspiring lifestyle and trendy living, instead of the conventional housing scheme. It is anticipated that there will be more variation of terraced houses in terms of concept, design, layout and sizing as developers compete to seize a larger pie of market share. Following the success of Lake Edge , another developer (SDB Properties) launched their 18 Aman Sari project in the Puchong locality.
Upmarket condominium development trend is also evolving to higher standards as developers work hard to cater to the discerning group of purchasers who are well-travelled and exposed to building standard set by other renowned developments in other world cities. In recent years, KL City has been the talk of town with the emergence of high-end condo projects such as The Marc, Dua Residency, The Binjai and Stonor Park . All of these condos have been enjoying brisk sales and commanding premium price of above RM500 psf (up to RM1,000 psf!) because of their strategic location within the prestigious address of KLCC. With many more developers joining the foray of high-end condo development in the near future, competition will be stiff and more exciting buildings will be built, radiating style and sophistication in the KL sky line.