High-rise residential buildings gross ROI not affected by Covid-19

According to local end-to-end property rental platform, Speedhome, the gross return of investment(ROI)  in long-term rental market high-rise residential buildings in certain areas is higher than that of banks’ 12 months deposit or 2.2 percent, registering a gross ROI between 3.2 percent and 5.2 percent.

Chief Executive Officer Wong Whei Meng said that according to the company’s rental transaction records in the past year, the long-term rental demand for high-rise residential buildings in Selangor and Kuala Lumpur has not significantly been impacted by the epidemic.

Some popular rental areas such as Shah Alam, Petaling, Wangsa Maju, Damansara Perdana and Cheras, with midrange residential property monthly rent ranging between RM1,500 and RM2,000 have seen demand remain high.

Wong pointed out in areas such as Petaling, two-bedroom and two-bathroom fully furnished high-rise apartments ranges from RM1700 to RM2200. In contrast, the current selling price ranges from RM400,000 to RM450,000, and the gross rental return rate is about between 4.5 percent and 5.2 percent, in the case of lower bank interest rates, it is regarded as very attractive.

Considered as student rental hotspots, areas including Shah Alam and Wangsa Maju that usually see a healthy ROI has only recently seen a gross rental return rate between 3.2 percent and 3.75 percent due to soaring housing prices and increased supply within recent years,

“If the epidemic does not improve and universities are still shut, the long-term residential rental markets in Shah Alam and Wangsa Maju, dominated by student tenants, may face downward pressure on rents.”

Surprisingly, the densely populated Cheras’ gross rental return rate is not too high, only 3.75 percent.

The primary reason for this being that the residential rental supply in the area has also increased rapidly this year, and there are not many large office buildings nearby.

This shaped Cheras to become a tenant market. For some older 3 bedrooms and 2 living rooms property types, the monthly rent is only around RM1250.

The above gross rental return rate assumes that the house has no vacancy period for 12 months a year, the tenants pay the rent on time, and there are no other expenditures. The vacant period for homeowners to find new tenants may last as long as one to two months. If the commission and other expenses are deducted, the return on investment will drop to 0.5 to 1 percent.

Wong recommends homeowners to maintain consistency in their property being rented out. In addition to this, homeowners should utilise online technology services and understand their tenants’ needs and control costs in house decoration.


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