Property prices of high-end condominiums are expected to remain flat, while rental prices for such properties are expected to fall. This is happening mainly due to the increased competition between existing units and new launches, says property consultancy firm Knight Frank Malaysia.
As quoted in their report Knight Frank Malaysia Real Estate Highlights 2H2015, this situation may cause high-end condo projects to defer their launches scheduled for the first half of 2016.
The increasingly competitive property market are forcing developers to be more innovative by offering attractive packages and creative deals to boost sales.
Therefore, many projects are following after the trend of offering leaseback arrangements and pool management programmes with guaranteed rental returns to boost sales and attract potential buyers. Tenants continue to be spoilt for choice with attractive rentals, incentives and tenancy terms. They expect these offerings to also lure investors looking for long-term investment in terms of rental returns and potential capital appreciation.
However, due to the weak market sentiment, potential buyers and investors may adopt a wait-and-see approach before deciding to proceed further. Retailers are equally adopting the same caution in their expansion plans amid poor sales performance and reduced profitability. In the Klang Valley, the weak currency and toll hike were expected to further dampen consumer sentiment over the next six months as disposable income falls.
In the third quarter of 2015, Kuala Lumpur recorded 1,694 transactions under the condominium and apartment segment, which was 6.3% less than 2014.
For office properties in Kuala Lumpur and Selangor, there is a growing pressure on rental and occupancy levels due to the high supply of existing and new pipelines and a weaker leasing market.
The depreciation of the local currency, volatility in commodity prices as well as economic and political uncertainties work adversely for office properties. Prices of office properties was previously driven by the services sector and oil & gas (O&G) businesses. The compression of the O&G sector following the plunge in global crude oil prices, has negatively impacted that segment of the properties market.
Rental rates could possibly fall due to heightened competition in the tenant favoured environment. With business confidence at a dip following the economic slowdown, the take-up rate and overall occupancy levels will be impacted.
However, rental rates of well-located spots and dual-compliant office space are expected to remain flexible.
Some regional and local retailers are taking up larger lots at competitive tenancy terms with attractive rentals and incentives to improve space and cost efficiencies.