Luxury property buyers undaunted by higher interest rates?

High-end property buyers seem unaffected by the higher cost of funds, given the recent success of launches in Kuala Lumpur, even at new benchmark prices.

The recent high-end property launches, which include a condominium development and a landed property, have led many property experts to talk about the high take-up rate despite a 25 basis point rate increase earlier this month.

The launch of S P Setia’s 708-unit residential tower, which is part of the KL Eco City (KLEC) project, saw priority customers taking close to three-quarters of the units with a gross floor area (GFA) of between 650 sq ft to 1,200 sq ft, which were priced at around RM1,200 psf, 10 percent higher than the initial price. Surprisingly, the bigger loft units were all sold out, priced at more than RM300 psf.

The demand for luxury condos in prime areas saw YTL Land’s 466 condominiums at Capers@Sentul East, launched last month, sold out in less than one week.

Even landed properties at Desa Park City showed little signs of price relief. It’s Mansions @Park City Heights listed between RM2.7 million and RM7.5 million recorded an extraordinary 86 percent take-up rate at its pre-launch this month, said Maybank-IB.

A major selling point for KLEC and Capers, aside from better security and amenities, has been Kuala Lumpur’s proposed mass rapid transit (MRT) blue line. Work on the main line linking KL and Kajang to the south-east will begin this year and will be completed by 2016.

"Hwang-DBS's Ms Yee, commented that investors responded positively to the MRT, and are eagerly monitoring the development in the Economic Transformation Programme."

The consequent rate hikes are not to detrimentally impact demand, as borrowers will see a subtle increase of RM100 to RM200 per month on the monthly mortgage. However, that Bank Negara Malaysia will raise the overnight policy rate (OPR) by another 50 basis points (BPS) to 3.5 percent this year.
In conclusion, the pricing trend will continue especially within Penang and the Klang Valley. “Anything priced below RM900 psf tends to be (quickly) taken up by locals.”