The keys to Cheras’ growth

SOUTHEAST of Kuala Lumpur and just 10 minutes from the city centre, Cheras is renowned for its traffic congestion especially during peak hours.

One of the city’s largest suburbs, Cheras is home to more than 100 landed housing estates, some established in the 1960s. Among the larger ones are Bandar Tun Razak, Taman Connaught, Taman Maluri and Taman Midah. Properties in Cheras have remained largely affordable for the general population. However, the developments of Sunway Bhd’s Sunway Velocity and MyTOWN by Boustead Holdings Bhd and Ikano Pte Ltd in the Cochrane/Cheras area are spurring real estate values in this part of Cheras and the surrounding areas.

Sunway Velocity is a 23-acre integrated development with residences, shopping mall, hotel, medical centre, offices and shops and a two-acre park while MyTOWN is an 18-acre family and lifestyle shopping centre anchored by the largest IKEA in Malaysia. The entire mall is scheduled to be completed by end-2016 while the IKEA store is scheduled to open at the end of this year. A subsidiary of Boustead Holdings, Mutiara Rini Sdn Bhd, the master builder of the Mutiara Damansara township in Petaling Jaya, will be developing another project, Mutiara 482 Cochrane,comprising 800 condominium units.

KGV Lambert Smith Hampton (M) Sdn Bhd director Anthony Chua (pictured, right) says these new developments and IKEA will infuse new life into an otherwise jaded locality of mainly aged properties.

“There will be an upgrade of businesses and offices with Sunway Velocity while IKEA will tap into the market on the eastern side of the city centre,” says Chua. He adds that the areas in Cheras closest to KL city centre will benefit from the convenience and facilities offered.

Property Exchange senior team leader Derrick Hum concurs with Chua. “The two developments will spark a transformation of the surrounding areas which in turn will draw investors.

“Now, residents in this part of Cheras can enjoy the lifestyle concept of live, work and play in one place, which has been popular in big cities such as Beijing, Jakarta and Taipei,” says Hum.

Raising the bar

Cheras generally comprises decades-old housing estates interspersed with small commercial centres and a few malls. Housing developments in the area consist of mostly terraced houses serving a middle-income population. There are a smattering of high-rises which are mainly old flats and medium-cost apartments while a few high-end condos have recently been built.

According to analysis by theedgeproperty.com, the average price per square foot (psf) as at 3Q2014 for non-landed properties stood at an affordable RM334, up a mere 1.5% year-on-year (y-o-y). But this comes on the heels of a whopping 22.3% jump a year earlier (see Chart 1). A majority of transactions (31.9%) in the 12 months to 3Q2014 were units in the RM300,001 to RM400,000 price range, followed by 22.8% of units in the RM200,001 to RM300,000 range. Properties in the RM700,001 to RM800,000 price range accounted for only 0.2% of transactions, with the most expensive development being Prima Midah Heights by UOA Group Sdn Bhd at an average transacted price of RM643,909. Units are about 1,400 sq ft. Prima Midah Heights also recorded an impressive 20.6% price growth in 3Q2014 from a year ago, indicating a demand for higher-end products by the growing upper-middle income group in Cheras.

Hum says property prices in Cheras have risen substantially in general over the past five years. For example, the Amaya Maluri serviced apartment was priced at RM500 psf when it was launched in 2010. Today, it is transacting at RM730 psf, more than a 45% increase.

The asking price for a freehold single-storey terraced house in Taman Taynton View, measuring 22 ft by 75 ft, was recorded as a transaction of RM580,000 early this year. The same property was priced at about RM350,000 in 2010, Hum says.

According to Chua, properties near the Sunway Velocity development appear to have appreciated significantly since 2010, including shop units in Taman Maluri and the apartments in Plaza 393 on Jalan Peel, facing Sunway Velocity. (See Table 1)

Real estate in the Jalan Cochrane vicinity such as Jalan Peel, Jalan Shelly and Jalan Jejaka may also see an appreciation in land value as these areas are ripe for redevelopment, especially given some of the rundown properties there.

“These properties have latent opportunity for redevelopment. Investors who want a piece of the action in this area should scout for such properties,” Chua says. 

He points out there have been no recent sales in the area. The IKEA lot was purchased at RM393 psf in 2012.

DTZ Malaysia executive director Eddy Wong (picture,left) says nearby residential areas such as Taman Maluri will see an upside in property values, especially with the additional amenities and improved accessibility from the redevelopment of the Cochrane/Cheras area.

According to Wong, residences at Sunway Velocity Phase 1 were launched in 2011 for about RM800 psf while Phase 2 was launched in mid-2014 for about RM1,200 psf, a price appreciation of approximately 14.5% per annum.

Rental yields in Cheras for commercial and office spaces are in the range of 5% to 6% per annum. New office space rents at Sunway Velocity are at RM3.50 psf.

Wong also expects to see spillover demand for residences in the Cochrane/Cheras area from the capital’s new financial and business district, the Tun Razak Exchange (TRX) project, as these areas will offer a wider choice of accommodation for those working at or close to TRX or the city centre.

Property Exchange’s Hum says rents for condominiums in Cheras are currently between RM2 psf and RM3 psf for a fully furnished unit. Older condos such as Warisan City View are going for about RM2 psf, while newer and higher-end developments such as Amaya Maluri are going for RM2.60 psf to RM2.80 psf.

“A fully furnished condo unit within an integrated development stands to fetch a higher rental of RM3 psf onwards. Overall, rental demand in Cheras is strong in view of its close proximity to KL city centre and relatively low rental rates.”

The edgeproperty.com analytics show that rental yields in Cheras are good, with many developments reaping a yield of 5% and above due to reasonable capital values.

Traffic and infrastructure

Cheras is well served by public transport including the light rail transit, and this should improve further with the upcoming MRT Line 1 (MRT Sungai Buloh-Kajang Line) that is scheduled for completion in the second half of 2017. The planned Cochrane and Maluri stations will be located close to each other, to serve the Sunway Velocity area as well as Taman Maluri. The latter is close to an LRT station, and this will boost connectivity in this part of Cheras even further, says Chua.

Other proposed MRT stations serving Cheras include Taman Pertama, Taman Midah, Taman Mutiara and Taman Connaught. 

Hum concurs with Chua. He says that each train serving the line will have four coaches with a total capacity of 1,200 passengers. Daily ridership is expected to be about 400,000 passengers. At the planned running interval of 3.5 minutes between trains, Hum believes “overall traffic congestion in Cheras will be improved significantly if not entirely”.

To ease traffic flow further, several roads in Cheras have also been upgraded. The opening of the Besraya Eastern Extension Expressway (BEE) has effectively linked areas such as Serdang with Cheras and Pandan.

Chua says that high-rise projects being developed near MRT stations in Cheras are expected to do well. He cites EkoCheras by Ekovest Bhd, located on freehold land on Jalan Cheras, which is 9km away from KLCC and will have the proposed Taman Mutiara  MRT station close by. Comprising serviced apartments, office units and hotel suites, the development is set to make a mark in the area. Launched in 2013 at RM700 psf, the units have a built-up area of between 831 sq ft and 1,300 sq ft. Semi-furnished, they come in configurations of 1, 2 and 3-bedrooms. The offices and hotel were launched in March this year and the project is scheduled to be completed at the end of 2017.

He adds that other parts of Cheras will be boosted by the “MRT effect”. As an established area with ample amenities, and new lifestyle developments and MRT stations, Cheras is expected to attract more investor attention. One thing’s for sure: Cheras’ makeover starts now.

Generation gain

DERRICK Hum has been staying in Cheras for the last 30 years. He says a strong neighbourhood culture can be found in the area as a majority of residents are second and third-generation locals.

“I’ve lived here since I was born and have personally witnessed the transformation of Cheras from an estate area into an urban city…I can safely say that the progress has been gradual.”

There’s a laidback vibe in Cheras, with the older generation preferring to sit in coffee shops with friends while their spawn hang out at malls such as Leisure Mall, Cheras Sentral, Ikon and C180 (Cheras South).

“Houses in Cheras were first built in the 1960s (Taman Taynton, Midah) and 1970s (Taman Cheras, Connaught). Back then, the road leading to Kajang was only a two-way single carriageway, but now, it’s a four-lane wide highway! Prices in Cheras have appreciated substantially,” says Hum.

Hum, who inherited a 1-storey terraced house from his grandparents, says that it was initially priced at RM15,000 in the 1960s. A similar unit was recently transacted at RM600,000. He also owns a duplex townhouse which he bought for RM620,000 in 2012. The property is now valued for at least RM1 million.

Cheras Leisure Mall, the first full-fledged mall in the area, opened for business in 1996 in Taman Segar. “After nearly 20 years in operation, it’s still considered a landmark and is one if the most popular malls in Cheras.”

Established schools, medical facilities such as Pantai Cheras Medical Centre and Hospital UKM, and other amenities, have benefitted the people.

Other than traffic congestion and flash floods that occur in certain areas, Hum believes new developments are necessary to rejuvenate old areas such as Cheras and to refresh its demographic profile. 

“I believe the government did its due diligence before approving certain projects. We just need to bear with the temporary inconveniences in order to enjoy the long-term benefits,” he says.

This article first appeared in The Edge Property, the property pullout of The Edge Financial Daily, on July 24, 2015. Get the full pullout here.

For a quick and brief analysis of the property market in Cheras:
PROPERTY SNAPSHOT Cheras is undergoing a transformation
PROPERTY SNAPSHOT What’s affordable in Cheras?
PROPERTY SNAPSHOT What are developments priced like in Cheras?
PROPERTY SNAPSHOT What’s hot in Cheras?