KLCC High End Properties Auction Effects on Nearby Properties
A view on current market trends in regards to KLCC High End Properties Showing up in Properties for Auction
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Does a KLCC condo auction affect valuations for other units?
There was a time when auctions of KLCC properties were rare events. At Kirana Residence, a 5* KLCC SUPER condominium where I have owned a unit since 2000, I can only recall just 1 auction – for a 4 bedroom unit- some 10 years ago.
But now I see auctions of KLCC properties at fire sale prices are on the increase. I think but cannot be 100% certain the trend towards more auctions of high end KLCC condominiums is due to the high levels of financial stress amongst foreign owners who cannot find tenants willing to pay rentals that will cover their loan installments. Anecdotal evidence suggests rents at some KLCC high end properties have fallen by 30-40% since 2018 due to a dwindling expat tenant pool. So as auctions for KLCC condominiums start to accelerate, I think we might see an interesting situation where the tail (aka the price in psf set at auction for one unit in a KLCC condominium) wags the dog (aka current market values for the rest of the units).
EdgeProp Analytics employs an automated valuation model (AVM) that uses a comparative valuation method that compares recent property price transactions in the NAPIC database to calculate estimated current market values. Under normal situations IE when the property market is not seeing significant price swings either up or down, I think AVMs do a reasonably good job of estimating current market value if there are enough recent property transaction prices.
But in the current soft KLCC property market, I think many high end investors are taking a wait and see attitude in light of political uncertainties, a weak Ringgit, falling rentals, unsure prospects for a recovery in incomes battered by the pandemic and of course, last but not least the brouhaha over every twist and turn over changes to MM2H policy. For example, I see a freehold 3400sf unit at 3 Kia Peng advertised for below RM700 psf a few weeks ago is still available. To my eyes, this suggests strongly there are few buyers in the market now for high end KLCC condominiums. What this implies for the short term is that the fire sale prices set at auctions will have increasingly bigger impact on current market values.
The one thing that caught my eye looking at the recent auctions of KLCC properties over the past couple of months is the scarcity of buyers appearing at 2nd or 3rd auctions. For example a leasehold unit at Fraser’s Residence (188 Suites) completed in 2013 has seen no bids even at the 6th auction.
Is everyone waiting for KLCC prices to drop further?
A high floor freehold 3513sf unit at K Residence, is now headed for its third auction in October, having seen no buyers for the first two auctions. According to one agent, the price in October has ben reduced to RM807 psf. When the twin towers of K Residence were launched in 2007-2008, I believe the launch price was around RM850-900 psf. K Residence is therefore being priced now at a discount to its launch price more than 10 years ago. As at 1 October 2021, EdgeProp Analytics puts the median price psf for K Residence at RM1,035. The other property portal I consulted, PropertyGuru’s Vantage suggests a valuation of RM1,026 psf for units of 3,000+sf. PG’s table of transaction prices shows that one unit was transacted at RM800 psf in 2019.
Looking at its Walkability Score, K Residence has a score of 99 out 100. That’s the highest score I’ve seen for a KLCC 5* SUPER condominium that is within 100 metres away from KLCC Park.
Now if you are interested in buying an auction property, you don’t really need to wait for the next auction which might be in another month’s time. Here’s a tip for avid property investors who know their way around the system, if you know the unit number you can try to find out who is the registered owner or the developer (assuming the developer is in liquidation and the developer’s financier is putting up the properties for auction). Go direct then and make your own offer to the owner/developer to buy his unit at 1% lower than the price mentioned. Note most banks pay a 2% commission to the auctioneers for marketing and selling foreclosed properties. So by going direct to the owner/developer your offer is still worth an additional 1% more money than if the property were to be sold at auction at the same price.
Of course, you will have to arrange your own financing and there will be no real estate agent to guide you through the process of buying the property. I don’t recommend the above for 99% of property investors. Only one seasoned property investor I know did go direct to the developer (in liquidation) but he had over 20 years experience in buying and selling properties.
Other KLCC auction properties that might be worth looking at are :
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a unit at Platinum Suites was recently sold by auction at RM900 psf in September 2021, virtually unchanged from the bulk purchase price psf sold to a Taiwanese buyer at its launch I believe. I think more units will be up for auction given the collapse of the AirBbB market in KL.
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A freehold 3 bedroom Idaman Residence unit going for auction in October @RM640 PSF. Idaman Residence is within 5m walk to KLCC Park.
Notes and disclaimer:
1. I am not a registered investment advisor with the relevant authorities in Malaysia. My last investment advisor’s licence expired circa 2001. If you are planning to buy an auction property, please consult a real estate agent or valuer registered with BOVEA.
2. The phrase “wag the dog” or “tail wagging the dog” originally appeared in a play. The common meaning of “wag the dog” is a small or unimportant part is becoming too important and is now controlling the whole thing.
Source by: https://www.edgeprop.my/transaction?category=RESIDENTIAL