Malaysia during the mid-2000s saw some of the best returns and capital appreciation in terrace houses and condominiums in Klang Valley. Later on, as the supply increases, rental prices began to decrease. Despite the increase in supply, developers had to adopt vertical development as land costs increase and the population continues to grow.
Due to the various trade wars (Russia-Saudi Arabia oil price war, US-China trade war) and the change in government in Malaysia, property sales saw a steep decline over 2020. Under normal circumstances, yields for high-rise residential properties could go up to 6% to 8%, while for landed properties were between 3% and 5%. However, the current situation places average rental yields for high-rise to be between 4% and 5.5% and landed properties between 2% and 4%.
According to Datuk Siders Sittampalam, Managing Director of PPC International Sdn Bhd, there is a highly close connection between location and properties with good rental demand. High-rise properties located in established and good areas will generate a much higher yield than landed properties. What makes a location ideal for such returns?
A good and established location would generally come with ‘amenities and facilities such as malls, international schools, private and public educational institutions, financial institutions, commercial hubs, entertainment zones, good transport and infrastructure systems such as rail networks, highways and expressways’ as reported by The Edge.
Despite the above, properties with high demand can also be found in older residential neighbourhoods such as Damansara Heights, Bangsar and Taman Tun Dr Ismail (TTDI), developments surrounding Old Klang Road, Taman OUG, Taman Gembira, Taman Desa, Taman Maluri, Bandar Sri Damansara and Taman Kanagapuram.
As for areas within centra Kuala Lumpur, Pavilion Residences and The Manhattan in Jalan Raja Chulan are two properties that stand out to the markets today. The rental markets for Infiniti Residences and Wangsa Maju are facing a shift in the market demand. Although these two areas are predominantly expatriates’ preference, locals are now opting to rent instead of buying a house due to budget constraints.
Expatriates prefer areas such as Wangsa Maju, Taman U-Thant and Mont Kiara due to their appeal for being close to international schools, workplaces, and amenities that bring them a little closer to home as international supermarkets.
According to Anna Wong (Director of Research and Consultancy at Savills Malaysia), areas located close to universities and colleges are beginning to present themselves as ideal locations for investment. These areas include Setapak, Wangsa Maju, Kerinchi, Kota Damansara, Subang, Bandar Sunway and Shah Alam. In these areas, investors may be able to expect a rental yield between 4% and 4.3% (except for Shah Alam at 3.9%).
Other attractive properties could be within the vicinity of malls, offices and public transportation. These could include areas such as Bandar Sunway, Subang’s SS15. In addition to that, although high-rise properties may receive better yields than landed properties, linked houses in strategic locations can make a difference and receive gains between 2% to 3%.