A BUBBLE IN THE MAKING?
by Lim Lay Ying
Property Times, New Straits Times
24th July 2004

A bubble? At RM5 million or possibly more for a 6,000 square feet house on a 7,000 square feet plot of land, is the Kuala Lumpur property market getting close to that?

Kuala Lumpur’s top properties are getting more and more expensive, and prices are causing more jaws to drop. This particular piece of real estate is one of the 12 bungalow units that will be built by E&O Property Development Bhd. on a three-acre freehold site located next to Sri Perdana, once the official residence of the country’s Prime Minister.

Named Seventy Damansara, the gated and guarded community for a select few high-net-worth individuals has been targeted for completion around the first quarter of next year. And the developer is in no hurry to sell. Why should it anyway considering that its condominium project in the heart of the city is clinching deals as high as RM4.23 million a piece.

With close to two-thirds of the 288 units in Dua Residency sealed by a word-of-mouth approach, E&O Property Development’s unwavering confidence in the real estate market is understandable. The RM4.23 million price is tagged on a triplex unit with a floor area of 6,033 square feet with six bedrooms and a private outdoor terrace. This is the largest of the 16 triplex units which are also available in sizes of 5,427 and 5,645 square feet. On a per square foot basis, these units cost a tidy RM700 approximately.

The smallest-sized condominium unit of 2,098 square feet in the two 20-storey towers cost RM1.13 million. At RM538 per square foot, this is deemed fair since the location on Jalan Tun Razak is just a stone’s throw from the Park at KLCC.

Ultra-luxury Homes

Nearby, KLCC Holdings Bhd. is setting its sights on a four-figure price per square foot for its 168-unit ultra-luxury condominium development. Located on a 2-acre site at the junction of Persiaran KLCC and Jalan Stonor, the sizes of the majority of the residences range between 2,200 to 3,600 square feet while the penthouses are from 5,500 square feet in floor area.

The developer has hinted a RM1,000 per square foot tag for the condominiums named ‘The Binjai’– each of which would have its own lift lobby. Shared amenities include a swimming and wading pool, a lap pool, a spa pool, tennis and squash courts, a clubhouse with a gymnasium, steam, and sauna facilities.

Yet another development vying for a similar stature is Bandar Raya Development Bhd’s project located at Jalan Binjai, across PNB Darby Park. The developer has engaged the services of celebrity architect Sir Norman Foster who has consistently set almost impossibly high design standards wherever he goes. His best-known designs include the HSBC bank headquarters in Hong Kong, the new Reichstag dome in Berlin, the Commerzebank in Frankfurt, and recently, London’s 30 St. Mary Axe.

Knockout Prices

Bandar Raya Development’s Jalan Binjai skyscrapers are tipped to draw instant attention of the ultra rich too, promising a lifestyle and a living environment beyond the imagination of most Malaysians. With such a prime chunk of real estate in the KLCC neighbourhood, Foster’s design is expected to be another of his look-at-me configuration as well, dominating the many neighbouring Kuala Lumpur skyscrapers now emerging on computer monitors.

KLCC Holdings’ and Bandar Raya Development’s projects are by far, the only knockout price hinted at for the Kuala Lumpur luxury homes’ market. They are nevertheless, setting the pace for others such as Magna Prima Bhd-Telekom Malaysia Bhd’s Embassy court at Lorong Kuda, which will offer 76 units of “5-star Diamond Class” luxury condominiums on a 0.87acre site.

There are many more lined up in the vicinity : Tan & Tan Development Bhd’s at Jalan Stonor; Glomac Bhd’s at Lorong Stonor; TA Properties Bhd’s at Jalan P. Ramlee… the list goes on.

Many will be curious about where the money is coming from to purchase these pricey homes – the most expensive of their kind ever in the city. Is the Kuala Lumpur property market a replay of the country’s market in the pre-1997 financial crisis period? Or is it built on more solid foundations?

There are solid trends backing this explosion in prices this time round.

Solid Trends

One, while the wider populations of the country are just starting to feel the effects of recovery, high-net-worth individuals as a group have been enjoying the fruits of recovery for the last 12 months. An improving stock market which has spiralled up by about 30 per cent over the period, has created windfalls for entrepreneurs and helped bolster the fortunes of the fortunate and add more new millionaires.

Two, due in part to rising incomes and capital gains from stock investments, the new-found wealth amongst these self-made millionaires is finding its way into solid, tangible investments. Because of the volatile nature of the stock market, people are drawn to bricks and mortar as property reasserts itself as an asset class because of its relatively high yields, low risk anchored by the physical building, stable long-term income streams from rent, and being a hedge against inflation.

Three, the financial capital is emerging as a formidable hub of the country’s finance and business activities, and a playground for the super-rich. And this has a clustering effect. Many wealthy people like to mix with themselves and they need to live somewhere which has the infrastructure to support them. Kuala Lumpur is starting to overflow with expensive restaurants and shops (by Malaysian standards), and the 24/7 night-life could get wilder.

The city’s top properties could get more expensive – and the super-rich may even make a profit on their new homes.