A more cautious Kuala Lumpur property market can be expected next year following the current global market turmoil, said property consultancy DTZ in its Kuala Lumpur 3Q 2011 Property Times report.
Looking forward in the residential sector, DTZ expects demand for luxury residential units to be slow. "There is an increased possibility of downside risk with increased wariness on the buyers' end which is fueled by fears of the uncertain market conditions and tightening credit of banks," it said.
Significant project completions in the third quarter (3Q) have placed pressure on rental rates, especially on high-end condominium units. Nevertheless, DTZ's data showed overall high-end condo rents in Kuala Lumpur remaining stable at RM3.50 psf, while the average capital value of high-end condos in Kuala Lumpur is hovering at RM626 psf, with Kuala Lumpur City Centre (KLCC) properties averaging at RM902 psf.
Although there is new pressure to sell newly completed units by investors, there is still selective demand for new launches. Developers have also been marketing smaller units as SoHos in mixed developments to appeal to younger buyers.
The outlook for the office market next year is more "somber" considering the projected completions in 2012, said DTZ.
Rental demand for office space in 3Q had slowed with most of the transactions being for relocation purposes. With oil and gas as well as the professional services sector driving the leasing demand for office space, rents had remained stable with prime gross rental rates at RM6.22 psf while average vacancy rate during the review period was at 13.10%.
There has been no change in capital values with prices for good quality surburban offices sold at RM600 to RM700 psf while prime offices are fetching an average of RM807 psf.
Current total stock stood at 61.74 million sq ft with a total 1.4 million sq ft to be completed by the year end, including the D'tiara Amanaraya Corp Tower, Crest Tower and Lot E@KL Sentral.
A total of 7.4 million sq ft of projected completions is expected in 2012 and "...with external headwinds, the overall net absorption rate could further slow down in 4Q which will not provide comfort to a market that is expecting 2012 to be a pontenial tipping point", said DTZ.
The investment market in 3Q2011 had picked up in terms of value and activity sparked by strong deals as well as those seeking homes for own occupation. Total investment value increased by 39% from 2Q 2011 to RM1,349 million. Geographically, most of properties sold are located in and around Kuala Lumpur. Looking forward the investment market looks set to be dominated by local investors as a result of foreign investor's cautiousness, said DTZ.
An optimistic outlook is seen in the retail sector due to a stronger ringgit, low disposal income, low unemployment rate and a strong tourism industry. Retail sales are forecasted to expand from RM182.44 billion to RM279.83 billion by 2015 despite a slip in the Consumer Sentiment Index (CSI), down 1.7 points from the previous quarter, signalling a more prudent and selective consumer spending plans.
Average occupancy rate registered a slight increase to 91% in the city and 88% outside of Kuala Lumpur. However, slow leasing rates had been experienced in newly completed centres while a total of 860,000 sq ft of net lettable area has been added in the last quarter, bringing the total stock in Klang Valley up to 45.8 million sq ft. Rental growth is expected to be moderate due to more projected new completions in the near future.