Admiral Residences: A Property Investment Gem in Melaka
Heard about Admiral Residences: A Property Investment Gem in Melaka? I’ve written about Airbnb in Melaka before but had not had the opportunity to head over and take a look at the opportunities present until about 2 weeks ago.
If you have not already heard about the massive land reclamation site that is Kota Laksamana in Melaka, then it would definitely interest you to read on.
Originally a sea area alongside Taman Melaka Raya, the up and coming area known as Kota Laksamana, has seen tremendous development over the past few years and is set to be the site of Impression City, Melaka. The 138-acre integrated mixed development site is set to turn Melaka into a modern city center similar to what Johor Bahru has become over the past 10 years.
If you have ever wanted the opportunity to travel back in time, today might just be your lucky day.
Property in Melaka
Melaka is one of those places that has been left relatively undeveloped but has all the potential to become a bustling city center.
The state currently lies in a very strategic location that is 128 kilometers from Kuala Lumpur and 250 kilometers from Singapore. That’s not all that far away from two of these major city centers, not to mention Johor Bahru, which is even closer than Singapore is.
What does this have to do with time travel though?
The fact that Melaka has remained undeveloped means that there has not been a lot of money coming in from outside the state or even out of the country. This has resulted in property prices in Melaka to have remained relatively low compared to the rest of Malaysia.
Just how low? Let’s take a look and see how property prices have changed over the years in Melaka, Johor and Kuala Lumpur.
* Property price data was obtained from Brickz.my
Looking at the graphs above, you’ll notice that median property prices in Melaka (200RM psf) have remained lower compared to Kuala Lumpur (430RM psf) and Johor (280RM psf). You’ll also notice that median property prices at city centers tend to decouple from the median price of the entire area which is very normal (property prices are highly correlated to proximity to nearby amenities), except in the case of Melaka.
Right now, Melaka median property prices in its city center are almost on par with property prices located anywhere else in the state. This presents a very interesting opportunity for a state with so much untapped potential. It is quite likely that property in the city center will become significantly more expensive than property elsewhere in the state much like it has done so in KL and Johor in the coming years.
One thing to remember though, is that Melaka is home to some of Malaysia’s most visited tourist attractions. The state had 16.79* million tourist arrivals in 2017 with majority of those travellers coming from China, Singapore, Indonesia, Hong Kong and Taiwan.
Believe it or not, Kuala Lumpur only received 12.29* million tourist arrivals in the same year.
(* I am not sure how accurate these figures are, but both were published in local newspapers on separate accounts. Honestly, I’m quite sure KL would have had more visitors.)
Melaka Chief Minister, Idris Haron, has also stated publicly that the state is targeting 20 million tourists by 2020.
2017 was also Melaka’s record high number of tourist arrivals whereas tourist arrivals in Kuala Lumpur saw a 3% decline from the previous year.
What’s driving tourists to Melaka though?
Melaka offers a look at Malaysia’s culture, heritage and tradition in a town with a very long history that appears almost as if it’s been frozen in time.
As a UNESCO world heritage city since 2008, the city was also named by Lonely Planet as one of the Asia’s Top 10 travel destinations in 2017. The British Post also ranked Melaka fifth in list of the world’s trendiest holiday destinations.
From Jonker Street to the plethora of museums in the city, there are tourist attractions in such close distance to each other. This makes it a one-stop holiday location that you can fully immerse yourself in, without having to travel long distances.
To add to its already long list of attractions, Melaka looks poised to become a flourishing city center as China sees Melaka as an interesting stop along it’s One Belt One Road initiative. The economic power house has invested US$7.2 billion in the 1,366-acre Melaka Gateway project.
With the completion of Melaka Gateway and Impression City, Melaka is going to be transformed into a bustling city center like its peers but still retain its eclectic charm as a UNESCO Word Heritage city. Combined with its record high tourist arrivals, there is little to say that Melaka’s property prices will remain low in the coming years.
All this leads us to the opportunity that is – Admiral Residences: A Property Investment Gem in Melaka.
Admiral Residences is a new development by Tanjung Ratna, in the heart of Kota Laksamana, Melaka. It is currently under construction and is set to be completed by end 2021. The development is located in a prime area just 10 minutes away from the center of Melaka City where all its tourist attractions are.
It’s actually part of the developments which are closer to the city center compared to where Impression City will be located (Encore Melaka is the first of the developments at Impression City).
It is not very often that you will come across a piece of property that has the potential to provide you with an amazing opportunity for some very nice positive cashflow and huge capital gains.
Just how good an opportunity?
Let’s crunch the numbers together, as the astute property investors we are:
First, let’s take a look at similar projects in the area and how they price comparatively.
|Development||Price (RM)||Size (Sqft)||PSF Cost (RM)||Density (Units)|
|The Wave Residences||427,250||645||662||570|
*Exact psf cost and final price will be slightly different depending on time of purchase, size and level, etc. These prices may no longer apply.
Looking at the table above we can see that Admiral Residences is by far the cheapest development in the area at the moment (more than 50% cheaper! – Talk about below market value!). Even though it will have the greatest number of units, it is still not a significantly larger amount compared to the number of units at Atlantis Residences.
Bear in mind that Admiral Residences is right beside The Wave Residences (Also called Faithview Hotel).
Admiral Residences is also NOT positioned as a ‘low-cost development’ by any standard and is a direct competitor in terms of development quality with both Wave and Atlantis Residences.
Admiral Residences is also jam packed with holiday goer amenities such as an infinity pool, a kid’s pool, SPA, Sauna, Jacuzzi, tennis courts, badminton courts and basketball courts and is perfect for an Airbnb.
After all, those 20 million tourists are going to need somewhere to stay when they visit Melaka and with the current trend of tourists choosing to stay at Airbnbs instead of a hotel, it should go without saying that there’s no better use for a property like Admiral Residences for an Airbnb.
Wave and Atlantis Residences already have numerous Airbnbs operating and the data is very encouraging. Nightly rates range from 130RM to 230RM per night for 1 and 2-bedroom units.
Considering that Admiral Residences smallest units are 3-bedroom, a safe bet would be to say that the nightly rate can be fixed initially at 220RM per night.
Let’s now do some projections at these rates and take a look at what the rental yield would look like running an Airbnb at Admiral Residences.
Considering that hotel data in Melaka shows occupancy rates are currently at 60% in Melaka (Averaged for a year) in 2017. We can expect Airbnb occupancy to be similar. So, let’s have a look at two different scenarios and see what our rental yield looks like.
Based on the two scenarios above, it becomes quite clear that as a property investment, It’s more than just a good opportunity. At 7% rental yield you’re definitely getting some good monthly gains and that’s just at 9 days occupancy per month which by Airbnb standards is poor and would be considered as a non-performing unit.
So, assuming that your unit is not performing well, you still can get some pretty amazing rental yield on one of these units.
Looking then at 50%, which is what you can expect from an Airbnb unit that is performing at a decent rate, (this is still far from what you can expect during peak season occupancy which will be upwards of 70%) – 12% rental yield on a property is considered phenomenal returns!
At just a 50% occupancy rate you can comfortably cover your entire investment upkeep inclusive of loan repayments, maintenance fees, electricity and Wi-Fi bills with the possibility of an extra bit of cash every month.
And if your unit performs well, you can expect regular net positive cashflow on your property investment, which it should, if you manage your Airbnb right.
Don’t forget about the massive opportunity for capital appreciation on your property that we talked about earlier. Melaka property prices are low compared to other cities in Malaysia and with so much planned development on the way and the rising number of tourists visiting the state each year, it looks like property prices will not stay at current levels for long.
If you haven’t yet felt like you travelled back in time, you should re-read the article and study the opportunity at hand. It’s a lot like having the chance to buy a piece of property in Kuala Lumpur’s golden triangle many years before the property boom there.
Remember to do your own research and find out more. Perhaps you might want to take a trip down to Melaka and see what all the fuss is about.
To find out more about Admiral Residences or to visit the showroom you can get in touch with Mr. Allan Chee at 014 668 9209.
*This post has been sponsored by Tanjung Ratna Sdn. Bhd. but has still been written from an objective point of view based on facts and figures from external sources. Please feel free to share your thoughts and comments below.