"Sterling" and "excellent" are some of the words property players are using to describe the Malaysian condominium market for the first nine months of this year. Property consultants and developers say in the Klang Valley, these strata living properties, particularly the high-end offerings, are receiving a lot of interest from prospective buyers — both local and foreign — thanks to a favourable investment climate.

Y Y Lau, CEO of YY Property Solutions (in association with Cushman and Wakefield) says the condo market in 2007 is showing an improvement over the previous year. She adds that there has been a lot of market activity in this segment and sales have been recorded at prices surpassing the previous record levels.

"The performance has been sterling," says Zerin Properties assistant head of agency Terence Yap. "We've seen prices increased by about 15% to 30% in selected developments," he says, adding that many developments recorded impressive sales following the scrapping of the real property gains tax (RPGT) in April. Generally, the buoyancy is attributed to the increase in affluence in the population, scarcity of good quality locations and products in the market and a strong liquidity in the market, he says.

The fact that high-end condos in prime locations are attracting foreign interest — from Singapore, Indonesia, South Korea, the Middle East, Australia and the UK — has given the market a shot in the arm, says Lau.

Yap adds that foreign investors are viewing Malaysia as an attractive proposition for real estate investment, thanks to investment-friendly government policies and fiscal actions. Property consultants and developers say the Malaysia My Second Home programme and the government's move to ease foreign ownership regulations have spurred buying interest. In December last year, the government removed a rule requiring foreigners to seek the Foreign Investment Committee's approval before buying housing units costing above RM250,000.

These incentives, coupled with the attractiveness of the Malaysian property market compared to its neighbours, bode well for upmarket developments. Besides local purchasers, they are also attracting foreign buyers from Singapore, Indonesia, Australia and the UK.

According to a developer, the response from offshore investors is not surprising, pointing out that in terms of the product offering, its condos are on par with what's being offered in Singapore or Dubai but is more competitively priced.

Besides the government initiatives, Yap says the Malaysian condo market is also reaping the spillover benefits of a vibrant Singapore economy and property market. "Singaporean property players and funds are increasingly looking at Malaysia as a great opportunity for expansion," he says. Foreign interest is also driving prices upwards. "Prior to the announcement of the RPGT waiver, the average price in KLCC is about RM650 to RM700 psf. Since the announcement and with the growing attractiveness of Malaysia, large groups of foreign investors, individuals or groups, have shifted full gear to invest in the Malaysian market, particularly the condo market. In effect, the price of KLCC condos is now at about an average of RM1,000 psf," he adds.

When discussing prime property locations, the KLCC address remains a top pick, and is favourite among foreign investors (who make up 30% of the buyers). Other prime addresses are Jalan U Thant, KL's Golden Triangle (excluding KLCC), Bangsar, Mont'Kiara, KL Sentral and Damansara Heights. Yap says the market in Petaling Jaya may have an appetite for high-end condos, "but there are no products at the moment".

In terms of supply, government data puts the existing stock of condos in KL and Selangor at 113,716 and 137,919 units, respectively, at the close of 1Q2007. The National Property Information Centre (Napic) also puts the volume of condo units under construction in 1Q2007 at 25,332 and 52,334 units, respectively, for KL and Selangor.

Trends in condo developments
For a condo project to be successful, location and product offerings are vital, property players say. This also means design development and innovative finishes are the key. Property consultants say developers appear to be putting in a lot of thought and creativity in the design, layout and quality finishes. Lau says these efforts have paid off for some developers, pointing out that upmarket condos boasting generous built-ups are reporting encouraging take-up rates. She adds that serviced residences are doing equally well.

As developers try to outdo each other to attract increasingly discerning prospective buyers, property consultants say tie-ups with renowned brand names will be more common. Yap cites co-branding efforts with premium brands like The Four Seasons as an example.

"I think the green element is also in now. People are getting more environmental conscious," says Yap. Increasingly, he says condo living, coupled with inner city living, is seen as a modern lifestyle. "Highrise living is now seen as a way of life and is a norm."

Yap thinks that strategic marketing, particularly the developer's ability to communicate its product clearly to the target market, is another ingredient. He says property maintenance and management play an important role in determining the long-term success of the project. "Upon completion, proper property management and maintenance will differentiate the men from the boys," he adds.

What's ahead
Going forward, the mood is generally one of optimism. However, Lau says while the condo segment will continue to shine in the short term, there may be oversupply, especially in KLCC.

Concurring with Lau, Yap says: "I think there will be a short-term oversupply of condos in KLCC, probably in the early 2008 as most of the developments [currently under construction] will be completed at about the same time." Zerin Properties estimates that as at Sept 10, there were 4,812 condo units and serviced residences being offered in the KLCC address (completed as well as under construction).

Nonetheless, he doesn't believe that there will be an adverse impact on the market nor will the oversupply last long. "It will not last long, given our investment-friendly policy and the scarcity of land in the KLCC vicinity," he says.