How I bought a freehold 1500sf 3 bedroom apartment in KL's Golden Triangle for 50% off
There is an interesting article in FMT today entitled “Houses at half price, anyone?” by Thean Lee Cheng. Recently a Chinese developer at Danga Bay cut its prices by a whopping 50% for six weeks to boost sales in a sluggish market. Elsewhere other developers in KL and Selangor are doing the same, trimming asking prices in light of a market where there are few buyers.
So is it time to buy now that prices are starting to fall? The writer, to her credit, asks a more pertinent question : Will property prices drop even further ?
No, the title of my post is not click bait. As some of my readers might have already guessed, I bought a freehold auction property, sight unseen, situated at the top of a hill at Bukit Ceylon at less than 50% of what the previous owner had paid. The year was 2006.
The three bedroom 1500sf unit was on the 10F of a 44 unit tower block. From its' balcony, I could peer into the pool deck of the adjacent condominium. I was the sole bidder at the 2nd auction. My bid -RM315,000 or RM203psf- was accepted right away. Adding up some out of pocket expenses bumped up my total purchase price to around RM325,000 (RM215 psf). Still cheap.
Why were other property investors not interested in bidding in 2006? Well, there was the precarious financial condition of the building maintenance fund (which I only discovered much later to my chagrin. Auction lesson #1 Always check the building's finances BEFORE you rush to put in a bid at an auction). This proved to be the root cause of most of problems that plagued what was once the first serviced residence in Bukit Ceylon, maybe even in all KL. I remember seeing somewhere an old news cutting that at its heyday the 3 bedroom apartments commanded rentals of RM5,000 up and the penthouses went for RM7,000 up.
But the glory of being the 1st serviced residence in Bukit Ceylon faded fast. Because of poor property maintenance practices, one lift seemed to be perpetually out of order. Termites had infested the sauna. To save money, the small pool on the 1st floor was even drained dry. Because of poor property management, the collection rate of service charges from owners fell below the breakeven point. And because owners could not attract and hang onto better quality tenants -facilities like the pool, sauna, squash court and function hall being unavailable, they didn't want to pay the monthly service charges. These problems were not insoluble. But it would take a new property manager with the right skill sets and time to put things right.
The USP of that Bukit Ceylon condominium was it's prime location- right in the heart of the city. Jalan Alor’s famous night hawker market was just a 4m walk away. Bukit Bintang - KL's oldest retail and entertainment centre was minutes away on foot.
Another big plus was the building's proximity to the offices along Jalan Raja Chulan from where I thought I would find tenants. The Weld supermarket , KL”s first supermarket in the 1960s, was also just 10m away. Pavilion Shopping Center with its 700+ outlets - one of KL's top 10 malls, which opened later is a 20m walk away. And some of KL's hippest bars can be found at Changkat Bukit Bintang, just down the road or 50m away.
Bukit Ceylon was also home to some 5* restaurants. Bijan and Nerovivo were 100m away. No Black Tie - a jazz club and perennial favourite hangout for visiting musicians - was around the corner. And during lunchtime, there was a very good ikan bakar stall just 3 minutes walk away.
Last month there was an Edge article which quoted some property experts that property prices in KL and KLCC are not going to fall by 50-60%. The argument was the same old chestnut (“there is a dwindling supply of development land in the city center”) trotted out by experts that are unwilling or perhaps ignorant of the fact prices of even freehold properties in choice locations in the city center can plummet 40-50% when there are no buyers.
Of course I know better. Perhaps the readers of this post might also agree with me that freehold properties in prime KL locations are not immune to price declines of that kind of magnitude.
I suspect but cannot confirm the property investment company that owned my 10F unit bought it because it had secured a rental guarantee for a number of years from the developer, and therefore enjoyed an attractive ROI of around 7-8%. But as the saying goes : all good things must eventually come to an end. When the attractive rental guarantee agreement expired, I think prevailing market rents probably could not cover the loan installments.
I rented out my refurbished unit for a number of years. Probably spent too much money on the renovations and furnishings. Then I made a YouTube video (apologies for the poor quality) to market it and quickly found a buyer in 2011. After 10 years I see my YouTube video has now accumulated just 400+ views. That is an average of 40 views per year - that must be a record of some sorts. 😜
Post Script : I think the type D no-view 1500sf units in that City Center apartment have yet to climb back to RM720,000 (as at August 2019, latest transaction date for a 1500sf unit in EdgeProp Analytics.
A similar but unrenovated unit, IE facing the backside of a neighboring condominium is available for sale at RM620,000 (RM400psf). The agent who has the listing said the price is slightly negotiable.
The EdgeProp Analytics page for Downtown Condominium has a scatter chart showing the recent high (about RM700psf) and low (about RM300psf) prices in PSF. See EdgeProp graphs below.
Copyright EdgeProp
Copyright EdgeProp
