Asking rents for Kuala Lumpur's prime homes drop by up to 8%

Overall asking rents dropped marginally by 4.5% to MYR 3.42 per sq ft per month.

According to JLL, the market recorded nominal sales amidst implementation of nationwide Movement Control Order (MCO). Closure of sales galleries, restriction on non-essential movement and closure of international borders greatly limited the investment activity. The slight decline in the unsold rate by 2 bps to 3.41% is likely due to the spillover effect of bookings made during 1Q20.

In addition, even though a recently completed project was added to the basket this quarter, the unsold rate remained constant on account of its good sales performance since launch. Sunway Mont Residences, located in Mont Kiara-Hartamas submarket, recorded over 95% sales at the time of completion.

Here's more from JLL:

One project completed in the quarter – Sunway Mont Residences, adding 288 units to total stock. Eight more projects that were expected to complete in the quarter were postponed mainly due to a temporary halt in construction activities. Although sites were allowed to operate at 50% capacity during the later phases of MCO, the completion schedules for many projects were hampered.

No new projects were launched in 2Q20 mainly due to the MCO enforcement, lack of demand and possible changes in future policies due to political uncertainty. Developers were seen shifting their focus to land-banking for future projects and recovering debts.

Asking rents drop marginally while asking prices improve slightly

All submarkets recorded drops ranging from 0.4-8% in asking rents. As a result, overall asking rents dropped marginally by 4.5% to MYR 3.42 per sq ft per month. This revision occurred mainly due to dampened sentiment among investors due to high vacancy rate and economic slowdown.

Asking prices improved slightly by 0.2% to MYR 1,016 per sq ft. Amidst the lacklustre performance of traditionally popular submarkets like KLCC and Mont Kiara-Hartamas, the DH-KH-Bkt Tunku submarket recorded the highest growth of 5.2%. With only a few high-end residential properties, this submarket is less competitive in comparison with most of the others.

Outlook: Slow recovery is likely to begin at end-2020

The MCO that was implemented since 18 March, has been extended until 31 August. With complete/partial closure of several businesses for a prolonged period, Malaysia is expected to face challenges in terms of economic growth and unemployment. With several federal initiatives to boost the economy, the market is likely to witness a slow recovery beginning at end of the year.

With delays in completions, the supply forecast for 2020 has been reduced by 1,871 to 8,279 units. Due to slower market activity and political uncertainty, several developers are revising their targets. As a result, the market is likely to witness fewer launches in the near term. Asking prices may improve slightly on account of new completions; however, rents are expected to remain under pressure.

Note: Kuala Lumpur Residential refers to Kuala Lumpur's prime residential market.

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