As new development projects are completed in Kuala Lumpur and fringe locations, competition in the rental market is expected to heighten amid a weak Malaysian housing market.

Property prices in the high-end condominium segment will remain flat, while rental prices fall, due to increased competition between existing units and new launches, said property consultancy firm Knight Frank Malaysia.

The increasingly competitive property market is also forcing developers to be more innovative, with attractive packages and creative deals being offered to boost sales, it said.

In its report called Knight Frank Malaysia Real Estate Highlights 2H2015 , the firm said this may also lead to some of the projects scheduled for launch by the first half of this year, to be deferred.

” There has been an increased trend of projects offering leaseback arrangements and pool management programmes with guaranteed rental returns to boost sales and attract potential buyers and investors looking for long term investment in terms of rental returns and potential capital appreciation, “.

The report added that potential buyers and investors, however, would continue to adopt a ” wait-and-see ” approach as market sentiment remained weak.

In the third quarter of last year, Kuala Lumpur recorded 1,694 transactions in the condominium and apartment segment, 6.3% less than a year earlier.

For the office market segment, in Kuala Lumpur and Selangor, it said there was growing pressure on rental and occupancy levels due to the high supply pipeline of existing as well as new stock, and a weaker leasing market.

” The depreciation of the local currency and volatility in commodity prices coupled with economic and political uncertainties do not bode well for the office market which traditionally have been driven by the services sector and oil & gas (O&G) businesses “.

” The contraction of the O&G sector, the main lifeline of the office segment following the plunge in crude oil prices, has negatively impacted the market “.

” Tenants continue to be spoilt for choice with attractive rentals, incentives and tenancy terms “.

The firm said rental rates could fall due to heightened competition in the tenant favoured environment.

With business confidence at a low, coupled with the economic slowdown, it was inevitable that the take-up rate and overall occupancy levels would be impacted, it said.

” Nonetheless, rental rates of well-located good grade, dual-compliant office space are expected to remain resilient, ” said Knight Frank.

In the Klang Valley retail market, Knight Frank said the weak local currency and recent toll hike were expected to further dampen consumer sentiment over the next six months as disposable income falls.

” Majority of retailers are adopting a ‘wait- and-see’ approach and caution in their expansion plans amid poor sales performance and reduced profitability “.

” A handful of regional and local retailers operating several brands are taking up larger lots at competitive tenancy terms with attractive rentals and incentives to improve space and cost efficiencies “.

Article by +Roxanne James on behalf of Propertyshowrooms.com