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Saturday, September 4, 2010

Dealing with oversupply

Not surprisingly and generally speaking, most realtors concur that there is an oversupply of condominiums in the KLCC vicinity.

For this reason, property valuation firm, VPC Alliance (M) Sdn Bhd managing director James Wong says he is neutral to negative on the condominium situation in KLCC as he believes the situation could only get worst unless the government jump starts the economy with more foreign direct investments and mega projects.

Having said that, many say there is still room in the premise for niche products.

“There are many condominiums coming onstream together. Not all do badly. There is a difference between the developers that are able to sell, and those that are not able to,” he says.

With that, the new condominium launches that stand a higher chance of securing good take up rates are those that have strong distinguishing features.

KGV-Lambert Smith Hampton Sdn Bhd director Anthony Chua says there have been no new launches of condominiums in the KLCC area in the last two years due to the global financial crisis and oversupply situation. In fact, in some instances, Chua says condominiums that were bought at RM2,000psf, and are now being sold at RM1,500psf.

“These units tend to be large with poor layout. The problem was that some of the developers over-marketed and over-priced their condominiums. So sometimes it’s wise to buy completed projects to actually see what you are really buying,” he says, adding that there is more activity in smaller-sized condominiums which are relatively more affordable.

To buy a good condominium, Wong says to first look at the strength and reputation of the builder to ensure that the developer is financially strong to complete the project even if there is a sudden economic downturn.

Secondly, ambience is important. Good developments have comfortable surroundings or good themes, and not a busy street with noisy ‘night clubs’ in front of it.

He added that investors also need to pay attention to the quality of finishings and the facilities offered.

Even so, CIMB Research head Terence Wong still sees opportunities in condos around KLCC. He explained that prices of condos at Mont Kiara have caught-up with prices of KLCC. But land near KLCC is significantly more expensive and scarce than in Mont Kiara.

According to DTZ Debenham Tie Leung (M) Sdn Bhd executive director Brian Koh, the issue of oversupply is more prevalent in the rental market. On this note, he says it may be easier to rent out smaller units of less than 2,000 sf as the oversupply involves those between the 2,500 and 3,500 sf range, which rental are generally higher than the housing budget allocations for expatriates.

Many lament that rental rates for condominiums around KLCC have been stuck at RM4 to RM6psf per month for the past the three to five years.

Chester Properties Sdn Bhd senior negotiator Nathali Tan says these rates are more applicable for condominiums around KLCC that were launched at RM700 to RM1,000psf levels five years back which are sizable but with basic designs and finishings.

On the other hand, Terri Har, marketing and sales manager of Layar Intan Sdn Bhd says that the recently-completed The Binjai on the Park has started to pull in tenants at RM7.50 to RM8.50psf per month, setting a new benchmark in the rental market.

By The Star

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