Strong demand for luxury residential properties, according to Minor Lifestyle and Real Estate
For a time in 2020, the global real estate market was affected by the Covid-19 pandemic before coming back to life once vaccines became widely available. One segment of the real estate market, however, has not been hit hard as expected.
According to The Wealth Report 2022 published earlier this year by international consultancy Knight Frank, luxury residential markets around the world have had a scorching 2021 as luxury homes have become the asset class of choice for individuals. ultra-high net worth (UHNWI).
The report also pointed out that in 2021, the value of the Knight Frank Prime International Residential Index (PIRI 100) increased by 8.4%, compared to just under 2% in 2020. This was also its largest annual increase since the index was launched in 2008, mainly due to low interest rates, a shortage of prime inventory and the attractiveness of real estate as an inflation hedge.
“It is true that the luxury residential real estate market has not been affected much by the pandemic over the past two years. UHNWIs are kind of ‘immune’ to any financial situation in the world,” says Micah Tamthai, COO of Minor Lifestyle and Real Estate.
Minor Lifestyle and Real Estate is a division of Thai conglomerate Minor International PCL (MINT), one of Asia-Pacific’s largest hospitality and leisure companies, with over 527 hotels and resorts, 2,200 restaurants and 400 retail outlets in 63 markets including Africa, Australia, South America and Europe.
Some of the brands of hotels, resorts and serviced suites in MINT’s Lifestyle and Real Estate division are Anantara, Avani, Elewana, Oaks, NH Hotels, NH Collection, nhow and TIVOLI.
In 2015, MINT partnered with Themed Attractions Resorts & Hotels Sdn Bhd of Khazanah Nasional Bhd to introduce luxury resort brand Anantara to Malaysia in Desaru, Johor. The luxury resort and residence project, Anantara Desaru Coast Resorts & Villas, began welcoming clients in December 2019.
“We have 90 hotel rooms for guests and 20 luxury residences open for sale at sale prices starting at RM7.5 million. We have sold six during the pandemic and all are beach front units with premium pricing.
“With travel restrictions lifted and the economy recovering, we are confident that the rest will soon be taken care of. In fact, we are here to explore the ground for the second phase,” Tamthai told City & Country in an exclusive interview in Kuala Lumpur, adding that this is his first visit to the Malaysian resort town since the pandemic.
The resort, which was temporarily closed for several months in 2020 due to nationwide lockdowns, has average room rates (ARR) of over RM1,000 before tax.
According to the Anantara Desaru Coast Resorts & Villas official website, the rate per night starts from RM982 for a high-end hotel room up to at least RM22,137 for a four-bedroom beach residence.
Tamthai says, “Of course, F&B has been affected by the lockdown, but it’s slowly picking up; the same goes for the occupancy rate of hotel rooms. Desaru is a new resort destination and has a beautiful coastline. We are honored to have welcomed many distinguished guests. Most of them are local Malaysians, including the royal family.
Focus on second home
In his Wealth Report 2022, Knight Frank concluded that “the world has never been richer and the role of property as a store of wealth has never been greater”.
According to the report, almost a third of the wealth held by UHNWIs is stored in their main and/or secondary residence. The extent to which these assets increase or decrease in value not only influences personal levels of wealth, but decisions to enter or exit a market affect the flow of wealth around the world.
The statement is proven in another well-received luxury project by MINT, located in Phuket, Thailand: Layan Residences.
Introduced in 2017, the first phase of Layan Residences consists of 15 luxury residences with built sizes of 17,222 square feet to 32,291 square feet and sale prices starting at US$12 million. At the end of 2021, 13 units have been sold.
Meanwhile, the second phase has 11 units, with an even larger layout of at least 32,291 square feet and sale prices starting at US$10 million. Only one unit is still available.
“We are looking to build the third phase now, due to the overwhelming response during the pandemic,” says Tamthai. “Up to 90% of buyers [of the second phase of Layan Residences] during the pandemic, there were local Thais, who had spent more time than ever in their home country due to the lockdown over the past two years and had started looking for a second home or vacation home outside of the city in the country.
He says price is not really an issue for UHNWIs when looking for a property. They focus more on product and service quality.
“Luxury residential targets a group of niche buyers. Therefore, the product must be exclusively designed to meet their current needs. For example, the pandemic has taught us the importance of personal space; thus, in the second phase of Layan Residences, we have increased the number of bedrooms to eight, from only three to five in the first phase,” says Tamthai, adding that some of the bedrooms could be customized as reception rooms, like a home spa. and sauna, at the buyer’s request.
MINT has also introduced a rental program at all of its luxury residential properties to help buyers manage, maintain and rent out their units when not in use. Tamthai says, “If they want to spend a few days here in their own unit, all they have to do is call us and we’ll arrange everything. This is why our luxury project is always close to our resort; the professional team will manage the property according to the standards of the resort.
“Under this rental scheme, UHNWIs no longer have to invest money to maintain the property as the rental would be enough to cover that. We try to make it as smooth as possible because, in this segment, quality of service is the key to making the model work.
He adds that the model is welcomed as it offers buyers peace of mind and rental income, and the price of the property will appreciate over time.
Tamthai points out, however, that the target market for the series of luxury residences under MINT has never been the investor, but people who love life.
“In fact, we are very selective about buyers as we are also focused on building community within the development. We want buyers of our luxury residence like-minded, those who like to live peacefully or a short getaway with enhanced security and privacy,” he says.
Commenting on the outlook for all luxury residential in the short term, Tamthai is confident that real estate will continue to be a top choice as an investment tool for UHNWIs, given the niche and the limited supply and relatively low risk compared to other investment tools.
“History tells us that real estate prices increase over time. In the short term, real estate presents lower risks, especially those located in high-end locations such as the CBD and popular tourist destinations. I expect the trend to continue and expand over time,” he says.