Rental yields and capital appreciation are said to be the main considerations of real estate investors.
However, rising house prices and supply have been affecting rental yields among non-landed residences in many places in the Klang Valley.
Properties in certain areas which have enjoyed high capital appreciation in the past, are now seeing weaker rental yields, some even lower than fixed deposit rates.
Despite so, there are a lucky few non-landed properties which still enjoy high rental returns.
Based on data gathered by the National Property Information Centre (Napic), there were 46 condominiums in Kuala Lumpur that had enjoyed gross rental yields of over 5% in 2015.
These are the top 15 condos with the highest yields recorded last year, according to Napic’s list, ranging from rental yields of 5.7%, to as high as 8.8%.
1. Menara Putra
2. Casa Kiara II
3. U-Thant Residence
4. Seni Mont Kiara
5. Mont Kiara Astana
6. La Grande Kiara
7. Golden City Condominium
8. St. Mary's Residences
9. Bukit OUG Condominium
10. Gateway Kiaramas
11. Hartamas Regency 1 & Hartamas Regency 2
13. Endah Regal
14. Vista Magna
15. Putra Majestik
This is because these condos are hugely popular with foreigners and expatriates, especially those within Mont Kiara or Hartamas due to their strategic location and proximity to international schools, as stated by Zerin Properties head of research and consultancy, Roja Rani Applanaidu.
Apart from that she also said that factors contributing to the strong rentals are the various condos’ strategic locations within or close to Kuala Lumpur city centre with excellent accessibility to commercial and financial hubs as well as amenities such as schools, eateries, malls, hospitals and others.
Another key factor that contributes to high rental demand is the closeness to public transportations particularly rail stations.
To add, JLL Malaysia Country Head, YY Lau, agrees that Mont’Kiara is a relatively good place to live in as the properties are architecturally and aesthetically pleasing, while incorporating greenery, spacious communal areas and lifestyle elements.
As for buyers who are looking for high rental yield, they will also need to look at maintenance costs, which could affect the net rental yield.
It is highlighted that investors should take into account costs such as the maintenance, which tends to be higher for high-end properties.
These costs could bring yields down closer to 5% and below.
Besides Mont Kiara, One Sunterra Properties Sdn Bhd Head of Agency, Terence Yap noted that locations on the peripheries of Kuala Lumpur city centre are generating interest from the middle class working population as these locations are well connected and easily accessible via major roads and highways as well as LRT stations.
He adds that these areas close to the city centre are the preferred locations among investors given their premium addresses.
Even within KLCC, prices have declined and some owners are looking to cash out, hence making yields attractive.
Not only that, it is also close to major existing landmarks such as Mid Valley City, KL Eco City and Bangsar South, as well as upcoming developments such as Bandar Malaysia and the High Speed Rail (HSR) terminal.
Given the current sluggish economy, the high property prices may cap rental yield growth in the medium term.
Hence, rentals and yields are not expected to rise in Kuala Lumpur if the economy continues to weaken as employment rate is affected.
Nevertheless, non-landed properties in locations near to public transportations and commercial and financial hubs will continue to record high rental rates and yields.
In addition to that, mature neighbourhoods like Bangsar, Damansara and Petaling Jaya, which have shown capital appreciation in the past, will also continue to maintain their occupancy rates, though yields may no longer be as attractive as before.