Comparing the Developments in KL Sentral: A Review of Riviera City
The much-anticipated Riviera City, KL Sentral project is definitely an exciting project especially when you are talking about Airbnbs in Malaysia.
Despite facing some delays as many other developments have around the world due to the Coronavirus Recession, the project is still very attractive from an investment standpoint.
The commercial mixed development is located in one of Malaysia’s busiest transportation hubs that has been heralded as one of the best places to live in Kuala Lumpur! Besides being one of the best places for people to live in, the location is also an absolute gem for property investors.
Investors who bought here have seen some very significant gains in their investment properties over the last 20 – 30 years.
Below is a listing of all the residential developments in Brickfields and KL Sentral which is the surrounding area where Riviera City is located.
|Launch Price (psf)
|Sell Price# (psf)
|Suasana Sentral Loft
|St Regis Residences
* Launch year and price may not be the exact year launched but is based on oldest transacted data available from Brickz.my
# Sell price is based on the latest transacted price for a unit at the development available on Brick.my as of October 2020
^ After all reductions and offers for TYPE B – 487 sf unit
Not all projects are created equal as you can tell from the table above.
If you notice, only one development appears to have lost some of its value – Dua Sentral.
The unit is definitely below market value as compared to the rest of the area. From my understanding this is likely due to the fact that these units are no longer being managed by Best Western, which has seemed to have a massive effect on its price.
Despite being located in the same area, it’s important to understand why certain projects have appreciated more than others over a similar time frame.
Let’s dissect and explore the major factors that have played a role in affecting the prices of these properties over the last 30 years and then consider the investment potential of Riviera City based on these factors.
The Rise of KL Sentral
If there’s one thing that people often forget, it’s that KL Sentral has not always been there.
As an adolescent, I remember only heading over to Brickfields to get groceries and eat some good Indian food!
There was no giant shopping mall just a stone’s throw away or any central mass transportation hub.
Stesen Sentral was the first piece of what is now the sprawling business and transportation center that is KL Sentral and was completed only in 2001.
This single piece of infrastructure was the pillar or the entire project and is primarily responsible for everything else that happened in the area since.
This location then became the central point from which all of KL’s passenger lines (Monorail, ETS, KTM Komuter, LRT) would meet and even included the KTM line which would go all the way up to Singapore and even the Express Rail Link (ERL) which would bring you to Kuala Lumpur International Airport (KLIA) and Terminal Bas Selatan (TBS).
Together with this transportation interchange, offices, banks, hotels and every other service imaginable, were built simultaneously to make the entire area what it is today.
This has caused the prices of developments in the area to appreciate consistently over time, even throughout economic recessions to reach the ‘lofty’ prices they have up to this day.
Proximity to KL Sentral
Despite being in the general locality, people will always say that Brickfields is not KL Sentral and the units do not have the same demand or inherent value.
The closer the development is to the KL Sentral, the more valuable the property one would assume.
But is this a misconception?
Investment value does not correlate directly to property value.
It all depends on how much the property cost the buyer when purchased compared to the price that he can sell it in the future.
Would buying Sentral Residences in 2016 have been as good an investment as buying The Establishment?
We can see here that someone who bought The Establishment would have seen close to a 30% gain over the past 4 years as compared to someone at Sentral Residences who would be struggling to sell his unit at the price he bought it at.
If you look at the map above, you’ll notice that Sentral Residences is located much closer to KL Sentral compared to The Establishment.
The Establishment has clearly been the better investment choice so far despite the fact that it is further away from KL Sentral.
Despite appearing on the high side, the price of Riveria City is in tandem with the growth prices of the surrounding area.
It is still cheaper than Sentral Suites and only slightly more expensive than The Establishment which were both launched 4 years ago.
Now that we’ve established the fact that the primary reason for the rise in property value in KL Sentral is due to its brilliant location and amenities, let’s take a look at the rental returns.
This is something that I always look for in any investment property regardless of whether there is a lot of potential for capital appreciation.
I much prefer my investment to be paying me each month, or at the very least being able to cover my property loan repayments.
If we look closely at KL Sentral, we’ll also come to see that due to it’s amazing location, the rental yield of the units here is about 6% which is slightly higher than the KL average.
If you’ve seen my post on the Top 5 Highest Earning Airbnb Rentals in KL, you’ll also have seen that KL Sentral/Brickfields is the 2nd highest earning location in KL!
So what does this say about the potential of Airbnbs at Riviera City?
Let’s do some math and see what kind of monthly returns you can expect.
From our info from Airdna.co, we can see that the average monthly rent for units in KL Sentral is RM3320 at an average daily rate of RM340.
There are 2 types of units at Riviera City, 250 sf and 487 sf. 487 sf units are dual key units. The units are small though, much smaller than other Airbnb options available in the area.
But where Riviera City units lack in size, they make up in class.
If you haven’t been to one of the showrooms yet, I highly recommend you take some time to go do so.
The units come fully furnished but are not fully inclusive of everything that you will need to run them as an Airbnb.
I would say that you would probably only need to spend a few thousand bucks on top to get it Airbnb ready but there’s really nothing else major that you’d need to add on.
Anyway, let’s back to the topic on hand – the rental returns.
The 250 sf units are fairly expensive and despite having a lower overall cost, the psf price of these units is a whopping RM1,293 psf after all their rebates and discounts which puts them at a higher psf cost than even the luxurious units at Sentral Residences.
The 487 sf units are much more worth it at just RM1,070 psf.
At RM521,000 for these units, they aren’t all that expensive despite their relatively small size.
And compared to the 250 sf units which costs about RM323,000, you’re getting 2 units in one at a cheaper psf price.
Airdna.co data also shows that the average group size for guests staying in KL Sentral at 4 which is good because that allows you to fit 4 in a group in both the rooms of your dual key unit.
This would also allow you to rent the unit separately as two individual units thereby increasing your nightly rate as well.
You could also go one step further and consider offering extra mattresses to guests in each unit putting your maximum occupancy for each unit at 3 pax each. You can charge an extra fee for the added person in each room on a per night fee basis for the additional amenities you’re proving for them for some extra juicy returns!
For the sake of argument, and to not be overly optimistic, let’s assume that you don’t make any additions and you evenly divide the nightly rate between the two units keeping them at the ADR of RM170 per night and you’re expected monthly returns are still RM3,340 per month.
Your loan repayment for a 487-sf unit calculated as 85% loan at 25 years, is only RM2,899.57.
That’s a monthly profit of RM440.43!
Will you be taking a 90% loan at 35 years?
If you are, you’re definitely going to be looking at some pretty healthy returns that might even cover all your other property taxes such as your cukai taksiran, cukai tanah and maybe even possibly your maintenance with a little bit of cash left over!
If you’re worried that operating an Airbnb in these units might prove to be an issue due to the recent news that has been going around stating that JMB’s are allowed to ban Airbnbs from operating, you need not worry, as this is not a new law.
You can find out more about this on my post about the legality of Airbnb’s in Malaysia here.
JMB’s have always had the power to develop by-laws as they see fit but will need to carry out an EGM or carry out a vote to make any such amendments.
To make these amendments, the JMB will also need not a simple majority but 75% of those in attendance to vote for the inclusion of the new by-law.
And I honestly don’t expect there to be many owners here who are looking to do anything but rent these units out.
I find it quite unlikely that anyone would purchase a unit here for their own stay simply due to the size of the units.
Besides that, Riviera City is also a Commercial Mixed Development and not strictly residential so there is even less likelihood of there being any issue whatsoever with regards to operating your unit as an Airbnb.
You can also view my post here on why it might not be the smartest investing move for property investors to want to consider banning Airbnbs in their building.
Bonus Cash Rebate
If you’re keen to take a closer look at one of these units, please do get in touch with me at firstname.lastname@example.org and we’ll offer you an extra RM1,000 cash-back bonus if you purchase a unit via my referral!
*Rebate will be paid in about 30 days after S&P & LA has been signed.
This is a sponsored post and I have vested interest in promoting this project. I still personally believe this is a good project based on the factors that I’ve laid out above.