PAULINE NG looks at real estate developments in the vicinity of the iconic Petronas Twin Towers
LIKE a beacon, the gleaming twin iconic towers beckon to the hordes of tourists that flock there daily for a snapshot of what many consider to be the symbol of Malaysia.
But tourists are not the only ones wanting a piece of the Petronas Twin Towers. In the past five to six years, demand for properties in the vicinity of the Kuala Lumpur City Centre (KLCC) has increased so much that thousands of high-end residential units have been built or are in the pipeline to meet the demand.
In 1995, before the Petronas Twin Towers came into being, the KLCC area had only six developments and some 928 units of high-end service residences, according to statistics by CH Williams Talhar & Wong. By last year, assuming the 3,000 plus units planned were completed, the number would have ballooned to 27 developments and some 8,000 plus units. Over the next three years, its data shows that an additional 6,000-plus units are expected to come into the market, so that by end-2010, there could be slightly more than 15,000 service residences in the KLCC vicinity.
If Malaysia is looking at a real estate bubble - as some fear it could be, especially if the US sub-prime problems spread - could Kuala Lumpur's hottest address get pricked?
Zerin Properties chief executive Previndran Singhe believes some of the developments that are not well branded could unfortunately become pie in the sky.
But to the still bullish, the latest land acquisition in the area will be further proof that there is indeed still more upside.
Conglomerate YTL Group, which set tongues wagging in Singapore with its successful if somewhat hefty tender for the en bloc purchase of Westwood Apartments on Orchard Boulevard for S$435 million cash, showed it was also prepared to set new benchmarks in Kuala Lumpur.
In the first week of April, reports emerged that it had acquired a plot of land measuring slightly less than an acre on Jalan Stonor in the KLCC area for RM85 million (S$36.6 million) or some RM2,000 psf, beating the previous benchmark of about RM1,500 psf.
Affin Securities said that this shows the excitement over the high-end property market is still present despite concerns over the looming US economic recession and recent election setback suffered by the ruling Barisan Nasional.
'We believe this segment is still attractive given the continued interest by foreign investors, especially Middle Eastern, in strategically located and concept-driven projects in the Klang Valley, Penang and southern Johor,' its property analyst, Alex Goh, said in a client note.
Mr Singhe agrees. He expects the next price benchmark for the KLCC area to hover around the RM2,500 to RM3,000 psf mark, with the 'really good' ones - such as the under-construction Four Seasons hotel-cum-apartment complex by Ong Beng Seng - fetching as much as RM3,500 psf.
Work has begun on the two towers - a 62-storey apartment and a 38-storey hotel - which would be built with CapitaLand on the prime location next to the KLCC Twin Towers. Believed to be launched at an average of RM2,000 psf initially, the units at the prestigious development are said to be selling at RM3,000 psf now.
Premium projects
Another development that is expected to begin construction sometime in the middle of the year but is already generating interest is Kwek Leng Beng's 42-storey Millenium Residences. Although a bit further from the Twin Towers, it is situated on Jalan Bukit Bintang next to Pavilion KL, the swanky new mall in the city. The agent has begun accepting registrations of interest, but said that the price has not been firmed yet. Some agents think it is unlikely to sell for under RM1,800 psf.
These unique, quality developments are far and few between - others are said to include KLCC Properties' The Binjai and stockbroking tycoon Chua Ma Yu's OneKL.
Mr Chua's daughter, Carmen, is convinced that Grade A, international-standard structures are the way forward. The driving force behind the construction of OneKL, she is of the view that the KLCC area is already congested and, with thousands of units in the pipeline, likely to face oversupply. For investors, the similarity of these units - 'all perfect substitutes for each other' - is unlikely to result in significant capital appreciation or a sustainable rental yield, she has observed, 'compared to if you buy a project that truly stands out'.
Most buyers, however, may not have the financial firepower to invest in these premium developments. For them, that land prices continue to soar owing to scarcity in the area is a point of comfort and a reason to be optimistic that real estate prices can be sustained.
Land prices in the KLCC area were around the RM600 psf mark three to four years ago before the upswing in the property cycle. However, only 28 per cent of chief executives polled by CH Williams in an opinion survey believe non-landed residential properties are at the peak of the property cycle, although the survey was general and did not focus on the KLCC area only.
Zerin's Mr Singhe maintains that the KLCC area would only reach its 'market equilibrium' in three years. 'The YTL purchase says a lot,' he observed, and scoffed at suggestions that the recent general election results had spooked investors. 'I have seen transactions increase a week after the GE.'
Real estate was a long-term investment, he said, adding at a property talk in early April in Singapore that he was overwhelmed by the interest. 'The number of people interested in Malaysian property is amazing,' he said, adding that even successful Singaporean developers were making a beeline for Malaysia 'because they feel the market has not peaked yet, and the country with its bigger population is still in a growth cycle'.
He believes that the area can absorb the additional units but stressed the need for improved infrastructure such as better public transport.
Traffic congestion and flooding remain perennial problems, and, if anything, could worsen with more residential and commercial developments taking place in the city. The bad news is that few see the situation getting better anytime soon despite previous talk by the authorities to encourage city living so that Kuala Lumpur is busy 24/7 instead of during working hours only.
Foreigners account for about one third of new units purchased, and property consultants have pointed out that quite a number are happy not to rent out their apartments but to keep them for occasional use and to hold on for capital appreciation. This could ease some of the pressure on rental yields which are bound to ease when more units come on-stream.
Source : Business Times - 15 Apr 2008
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