Monday August 13, 2007

New growth corridors added

Strong demand fuelling price escalation within Klang Valley


THE Klang Valley, also known as the Kuala Lumpur conurbation and the country's fastest growth region, is seeing new growth corridors being added.

The implementation of new infrastructure projects, especially highways, has opened up many new development opportunities and new growth areas.

According to Ho Chin Soon Research Sdn Bhd managing director Ho Chin Soon, good location with supporting infrastructure facilities and amenities is one of the prime factors driving the success of a property project. The right timing and strong branding are also important considerations.

“Although many parts of the Klang Valley are busy with building activities with new corridors sprouting, Petaling Jaya will continue to be the centre of gravity for years to come. That's why although the areas of growth are expanding outwards, many developments and changes are still taking place within 15km to 25km radius of Petaling Jaya (see map).

“But the most active area is undoubtedly the Kuala Lumpur City Centre (KLCC) with one of the highest concentration of high-end condominiums and bustling retail and commerce activities,” Ho said.

Other robust areas for development include Mont'Kiara and suburban enclaves such as Kelana Jaya, Kota Damansara and parts of Ampang and Wangsa Maju.

Ho said property buying and investment activities had picked up in the current positive market environment.

The exemption of real property gains tax and liberalised rulings for foreign purchasers has helped.

“Strong demand for well-designed and located properties is fuelling price escalation in the primary and secondary property markets. Real estate prices, especially in the high-end residential market, are recording strong gains in capital values,” Ho said.

He said the value of development lands in the prime areas of Kuala Lumpur had reached a high of RM1,000 to RM1,300 per sq ft (psf) from RM400 to RM600 psf just two years ago.

For suburban locations, recent project launches have recorded price escalations of between 8% and 12% compared with last year’s launch for similar units.

Bandar Utama's 2½-storey link houses have been snapped up at RM800,000 at their launch recently compared with RM680,000 less than two years ago, which shows that demand for well-located houses continues to be robust.

“My opinion is that buyers must quickly buy now before prices shoot up further. Based on what happened during the last cycle, property prices went up 50% to 70% in just three years.

“With that kind of escalation, it may be possible to see double-storey terrace houses in Bangsar and other well sought-after addresses touching RM1mil.”

Ho said going by the trend of previous market cycles, “there is still room for prices to climb further and this will be exacerbated by the rising inflation (see chart).”

The rise in salaries of civil servants in the middle of this year could fuel further inflation in the prices of goods and services, he said, adding that investment in property was now widely adopted as a hedge against inflation.

“Property has proven to be one of the best tools for capital appreciation.

“If you had invested RM1mil in residential real estate in KL in 1990, you would have more than doubled your asset value as it would have appreciated to RM2.5mil by the end of 2006,” Ho said.

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