Different perceptions of affordable luxury
Published on: Monday, October 07, 2019
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The low-income earners (B40) want luxury, as do the middle-income group (M40) but it is the high-income earners (T20) who exudes in luxury.
“[But] the perceptions of luxury among the B40, M40 and T20 household groups are different,” said leading global property consultancy Knight Frank Malaysia Managing Director Sarkunan Subramaniam.
But what is affordable luxury in the property context
To Sarkunan, affordable luxury housing refers to premium properties delivered in affordable pricing, that is to say, at levels that the buyers can afford given their income levels.
Affordable premium properties may include modern minimalist homes with smart features in a secured community with recreational amenities that exude a luxurious lifestyle, he told StarProperty.
But what works for a person may not work for another, says Veritas Design Group associate architect Aina Zuber In the property context, the definition of luxury is a combination of generous space, prime location with high-end amenities. In affordable luxury, one of these elements might be compromised, she said.
“The definition of luxury by younger consumers may be different from the typical luxury we see every day. For example, luxury for millennials is more about having the full experience of lifestyle that is normally out of their reach. For the older generation, luxury is more on buying something that has quality and lasts longer,” she said.
How does this translate into property design? “The definition of luxury is no longer just about having facilities such as tennis courts and game rooms, stone cladding finishes, bathrooms with hot tubs or even walk-in closets.
It is more about getting a quality living: co-living space, accessibility, smart homes and perhaps amenities such air-water purification,” she said.
When cutting across the different income groups, brands of fixtures and fittings that are popular with the mass market may be perceived as luxury for the B40 group while the M40 group’s perception of luxury is higher and they prefer reputable global brands, said Sarkunan.
The T20 group looks to luxury that commensurates with their lavish lifestyle – homes in exclusive residential districts or city centres that offer spacious accommodation with well-planned layouts and come with high-end fixtures and fittings, he said.
Sarkunan said the mean household income in Malaysia by household groups of B40, M40 and T20 are classified as RM2,848, RM6,502 and RM16,088 respectively.
Based on the assumption that the monthly repayment of a property loan should not exceed one-third of the monthly income, the estimations put the B40, M40 and T20 at RM190,000, RM430,000 and RM1.07mil.
In Malaysia, affordable luxury properties targeting the M40 should be priced in the region of RM430,000 to RM600,000, which is what many developers have been eying.
However, Sarkunan pointed out that the “affordable luxury” limit varies state to state
“[The cap for] prices of [affordable luxury] properties that are deemed affordable for middle-income earners in Kuala Lumpur and Selangor are in the region of RM720,000 and RM590,000 respectively.
For high-rise residential developments such as condominiums or serviced apartments, luxury is often associated with the wide range of facilities, like infinity pool with city views, gymnasium with branded equipment and Jacuzzi on elevated levels, provided in the development as well as the finishes and fittings of the units.
A reputable property management team and smart features incorporated into the developments are also key points to be considered.
For the landed property segment, luxury means better amenities cum facilities within the development such as the setting up of a gated and guarded community as well as the incorporation of modern and smart features within the homes. Luxury also translates to quality finishes and fittings within the residential units.
With such properties, keeping the pricing lower, and not too heavy for the wallet, can be a challenge. While in a luxury development, developers would just pass on the higher cost to buyers, in the affordable luxury segment, they may need to compromise part of their margins to finance additional luxuries, said Aina,
In the current tough market, affordable luxury products may help to sustain developer’s cashflow needs, as buyers who may be reluctant to buy luxury products may opt for affordable luxury products instead, she told StarProperty.
On the other hand, there are buyers in this segment who would be willing to compromise on certain aspects in order to own “pocket-friendly” homes with the experience of luxury living, she said.
“This may include projects that are built in lesser neighbourhoods with extra spacious apartments, with branded furniture and fixtures,” she said.
What’s affordable?
Sarkunan said the usage of Industrialised Building System (IBS) and reducing the cost of construction will mean that developers can offer more luxury facilities to the development. Keeping the land cost low and applying for the increment of plot ratio instead of buying land with higher allowable plot ratio at a high price is another way to reduce cost, he said.
The future for affordable luxury properties look promising. “From what we are currently seeing in the market, the demarcation of luxury and affordable will be blurred further,” Aina said.
“More developers are going to market their products as luxury even though in reality those products might be more suitable for affordable market.
The impact is that products that are supposed to be in the affordable market segment will be priced as luxury products.
“This might lead to property overhang that may affect the industry or the developers, or worse, it may lead to a group of unsatisfied buyers,” she warned.
Knight Frank’s Sarkunan also expressed similar fears. Individuals from the M40 group may overstretch themselves by reaching for a luxury perception that they cannot afford and end up with a debt they cannot service, he said. It is the M40 who are more demanding when it comes to the luxury aspect, he said.
