How are high-end residential properties performing at the moment and what is your outlook for the sub-sector moving forwards?
The economic slowdown aside, investors should always keep track of the bigger picture. There are different groups of people with various degrees of income levels, obligations and lifestyle requirements. And housing will always be in demand – people will either have to buy or rent, regardless of fluctuations in the economy.
My personal observation – the high-end market is still moving, transactions are happening. Nevertheless, the movement very much depends on the right pricing; setting reasonable prices as per market demand is crucial.
Considering that it is a buyer’s market, sellers who have the urgency to dispose of their high-end units must ask for realistic prices and settle for a lower profit margin. Aspiring purchasers will only make a move if they can score a good deal or even below market price properties.
To stand out from the rest and help attract buyers, owners should put in the effort to add value to their properties. A simple touch up or refurbishment exercise such as repainting the unit will make a big difference.
I am thinking of investing in a highend residential unit. Which areas/ neighbourhoods will offer the best potential in terms of securing a tenant?
Prime addresses which are wellequipped with numerous conveniences and amenities including shopping malls, international schools, etc should be on investors’ radar. The sure shot areas are still Mont’ Kiara, Bangsar and the KL city centre. The main reasons being:
1) Mature market and market awareness – these established ‘expat’ areas are what foreigners look out for when hunting for a place to stay in Malaysia as these spots are usually recommended by their friends, relatives or business acquaintances.
2) Established transportation infrastructure and amenities – in my six years on the ground, i have observed that those with children will always base their decision to purchase or rent on the distance and convenience of commute to their childrens’ school rather than to their workplace. Properties located nearby such schools and complemented by grocery stores, f&b outlets will generate considerable demand.
3) Bigger market for foreigners – these three areas which are located in central KL instead of falling under the Selangor state jurisdiction makes a difference to aspiring purchasers. Taking into account the state’s ruling over the minimum cap for the purchase of properties by foreigners where expats must adhere to the minimum selling price of RM2 million when purchasing properties in Selangor as compared to RM1 million for units located within KL. Hence, the lower restriction will encourage a higher number of expats to purchase instead of renting in these areas.
4) An increasing expat population
5) Located nearby many international offices and grade A office buildings
What are some of the factors/tips to consider when purchasing a high-end residential unit?
Investors should take note of the following:
1) Price: before purchasing, try to gauge the demand and current going price for properties in the area. Research for previous transactions on websites such as brickz.com.my or consult your real estate agent. You must also ensure that the property is within the bank’s valuation (get figures from at least 3 banks), is reasonable or below market price, if possible.
2) Demand: check the occupancy rate of the property with the management. You can research online and request agents to prepare a report which justifies the rental rate as per the property demand in that area.
3) Property maintenance: the more well-maintained a property is, the higher its potential for capital appreciation. Perform a background check on the efficiency of the property management committee by speaking to a few existing tenants. Besides that, get a rough idea on the property’s quality by doing your own due diligence on the developer’s background and past projects.
4) Future developments: keep yourself updated on what is going on in the area – will there be any developments which might enhance or degrade your tenants’ quality of your life? Are there new projects which will further enhance the competitiveness of your rental property?
5) Accessibility: connectivity and a supporting road network are everything to a purchaser or renter. No one would want to stay in an area which is difficult to traverse in and out of.
6) Unit’s condition: make sure to inspect the individual unit which you are thinking of purchasing. These include checks for cracks in the wall, leakages in the ceiling, timber flooring’s condition, piping quality, etc. You would want to get a place that is tenant ready.