Cashed-up Malaysians and foreign investors from Asia and the Middle East fuelled a boom in plush inner-city apartments that saw some 28 high-end buildings thrown up in the city centre.
But the international economic slowdown has seen prices at some buildings slump by up to 30 percent, while one in five properties languishes unsold on the depressed market, industry experts said.
"The situation is not good. There have been a lot of 'wait and see' buyers since late last year and I believe this attitude is still prevalent at this moment," said Robert Ang from property consultant Rahim & Co.
"Given the bleak economic outlook, we don't see the situation improving at least for this year," he added.
Tenancies are also down, and landlords are offering steep discounts on rentals, nervous that the traditional flood of new expatriates during the northern hemisphere summer may not materialise this year.
Rahim & Co estimates that sale prices for top Kuala Lumpur condos, including one plush development that features private swimming pools for each of its 94 apartments, will slump between 15 and 20 percent this year.
Prices at the glitzy 607-unit Marc building, which also houses a fashionable restaurant and art gallery and is steps away from the Twin Towers, have plummeted about 30 percent, according to industry sources.
Apartments that were selling for 1,300 ringgit (352 dollars) per square foot at their peak have been knocked down to 950 ringgit per square foot, making a three-bedroom condo more affordable at 2.0 million ringgit (566,000 dollars).
The 110-unit Meritz building was worth up to 1,500 ringgit per square foot when it was completed in the middle of last year but now prices have been slashed to an average 1,000 ringgit, with one sale sinking to 850 ringgit per square foot.
"The question is where is the demand coming from? Even without this economic downturn, we were already concerned about what demand there would be for these luxury condos," said Ong Chee Ting, a property analyst at Maybank Investment Bank.
Investors from Singapore and Hong Kong had been attracted to Kuala Lumpur, where for a fraction of the price of an apartment at home they could snap up a condo with world-class design, tight security and unparalleled location.
They were followed by buyers from the Middle East, who were similarly flush with cash and drawn to the country, which is predominantly Muslim and has worked hard to accommodate tourists from the gulf states.
But the situation turned ugly when foreign investors, who represent up to half the trade in Kuala Lumpur's top condos, began to fall victim to the global economic crisis.
Another factor leading foreign buyers to shun property investment in Malaysia, say industry sources, was landmark general elections a year ago that saw the opposition gain unprecedented ground, including winning control of five states.
Questions were raised over several high-profile developments approved by the outgoing administrations, notably on the northern island of Penang.
"For investors, they will hold back their decision while from developers' viewpoint, they don't know what the policy is in the opposition-led states," said Goh Tian Sui, managing director of property consulting firm CH Williams Talhar and Wong.
Despite the global crisis, none of the five new luxury condo projects still under construction in the Twin Towers area has been put on hold, and they are expected to be completed on schedule.
Developers said they were optimistic of clearing the backlog when the economy bounces back, allowing buyers to take advantage of what by regional standards is now an even better bargain.
"The Twin Towers area is still the number one selling point as it's easier for foreign investors to relate to," said Ang.
"It's just like if you go to France and if you can afford it, of course you would buy next to the Eiffel Tower."
Source: AFP - 7 May 2009
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