Tips And Strategies To Invest In Kuala Lumpur And Selangor

I was walking around KLCC and Bukit Bintang one night and noticed that despite the bright lights emitting from Malaysia’s iconic Petronas Twin Towers, it stands in stark contrast to the many vacant units at the nearby luxurious condominiums.

I recall covering the KL property market back in 2008 when some of the units in KLCC were launched as ‘bungalows in the sky’.

One particularly iconic development that I had visited has units as big as 4,000 sq ft. While living in such condo is definitely a dream for many, alas, it is out of the reach for the majority of Malaysians.

Coupled with the Lehman’s Brothers crisis during the same year, developers suddenly realised that such units were indeed hard to move as they aren’t affordable to locals while foreign buying had somehow declined.

Still, there were some high net worth Malaysians and foreigners who had purchased these units as their ‘trophy properties’ and to rent them out. Sadly, that didn’t quite happen as well.

In this article, I will be sharing with you the tips and strategies should you wish to invest in Kuala Lumpur or Selangor in 2015, in the hope that you will minimise your mistakes.

Most homes in the Klang Valley area are already averaging more than RM600,000 and are out of reach for first-time homeowners. Therefore, this market will primarily be driven by middle-income, well-to-do locals, as well as foreign investors.

Properties in prime areas are priced approximately RM2,000 per sq ft onwards.

Last year, Kuala Lumpur’s prime areas witnessed a flurry of high-end condominium launches in Bukit Bintang and KLCC. The Harrods and Banyan Tree average at RM3,000 per sq ft.

Despite the prestige of such brand names, many locals tend to shy away from such projects due to its overall quantum price. However, high net worth Malaysians may still snap up such projects as these are considered to be the ‘trophy properties’.

Most of them do not prefer staying in these properties and prefers renting it out or use it as their holiday homes. For foreigners, these projects are preferable due to the minimum purchase limit and its location right in the city centre.

On 1 March 2014, the minimum purchase price for foreigners to acquire properties in Kuala Lumpur was increased from RM500,000 to RM1 million. Hence, if we use RM2,500 per sqft as a price gauge, a studio apartment of 500 sq ft can easily fetch RM1.25 million.

According to DTZ Research, the third quarter of 2014 saw a healthy amount of new supply with the completion of five high-end residential projects, adding a total of 574 units to the market. In the first three-quarters of 2014, a total of 1,892 units have been completed.

The completed developments in the third quarter were mostly located in the city centre, namely Brunsfield Residence @ U-Thant (93 units), Madge Mansions (52 units), One @ Bukit Ceylon (354 units) and an unnamed high-end residential development at U-Thant by Bandar Park Sdn Bhd (12 units). Only one development, Kenny Hills Residence (63 units) is located at the outskirts.

Data from DTZ Research also showed that 4,604 high-end residential units was expected to enter the market at the end of 2014.

Amongst the major developments in the fourth quarter of 2014 were The Elements (1,040 units) by Elite Forward, Sky Residence – Phase 2: Celesta & Divina (450 units) by SP Setia and Icon Residence (260 units) by Mah Sing Group.

It was the best time for locals to buy a home in the Klang Valley area. Small studio units were on demand, as they can be easily rented out and sold to both locals and expats since the quantum price was within the range for both locals and foreigners. In addition, such units are limited in supply which makes them a rare find.

According to DTZ Research, the high-end residential market in Kuala Lumpur saw marginal growth in the rental values. Average rent increased 0.7 percent quarter-to-quarter, from RM3.59 per sq ft per month in the second quarter to RM3.61 per sq ft per month in the third quarter.

Moving forward, average rental are expected to fall due to the almost 6,000 supply of new units, which will be flowing into the city centre from 2016 onwards.

Data from National Property and Information Centre (NAPIC) showed that Kuala Lumpur has an existing stock of 434,484 units with an incoming supply of 53,394 units by the fourth quarter of 2014. All these factors increased the pressure on rental yields.

For those who are thinking of renting out their properties, it is best to take a long-term investment horizon by focusing on the capital appreciation.

The luxury sector also saw a marginal growth in the capital value.

According to DTZ Research, the average capital value increased 0.7 percent quarter-to-quarter, from RM758 per sq ft in the second quarter of 2014 to RM763 per sq ft in the third quarter. This is expected to increase marginally, barring any economic crisis.

Areas near the MRT extension, spanning from Sungai Buloh to Kajang Line are expected to be popular among locals as it will ease their commute time to Klang Valley, where many jobs opportunities are available.

In addition, there are many affordable properties in this vicinity which have the price tag of below RM600,000 – within the affordability price range of locals.

For locals, buying a property near the upcoming MRT stations will increase the overall desirability, rental attractiveness, and the capital values, as the properties will have higher demand once the MRT line is completed in 2017.

For foreigners, buying properties in Selangor are not appealing. This is because there seems to be some sort of anomaly in Selangor’s property market, as the minimum purchase price for foreigners has been increased to RM2 million effective 1 September 2014 in Zones 1 and 2.

The two zones include the Petaling, Gombak, Hulu Langat, Sepang, Klang, Kuala Selangor and Kuala Langat districts. This is rather odd as the entry prices in these areas are mostly below RM1 million.

As Selangor is located outside the Klang Valley area, the minimum purchase price here should be similar to Kuala Lumpur, as not many foreigners will need a big space just to qualify for the RM2 million ruling.

In view of this, foreigners will preferably purchase houses in Kuala Lumpur where the entry price is around RM1 million.

According to data from NAPIC, Selangor has the largest incoming supply for new homes in Malaysia by the fourth quarter of 2014, offering a total of 157,450 units.

Those who are thinking of renting out their units will face great competition once these units come on-stream in 2016 to 2017. Therefore, properties that are located close to the MRT lines will be very much in demand and can command higher asking price.

Properties near to upcoming MRT stations with interchange stations such as Kwasa Damansara in Kota Damansara, Sungai Buloh and Kajang will be highly sought after.

Kwasa Land Sdn Bhd is currently building a township in Kwasa Damansara for Bumiputeras measuring 2,330 acres. The township will be served by two MRT stations and four expressways – NKVE, Guthrie, NSE and the proposed Dash Highway.

In Kajang, a PR1MA housing project near the Kajang KTM and MRT stations are in the supply pipeline to be launched in the future starting from around RM158,000.

Properties near to MRT stations generally command a five to 10 percent premium in pricing compared to others.

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