KUALA LUMPUR – Landed properties are still preferable for potential homebuyers but dampening demands brought on increase in rentals over the first quarter of 2022 (Q1 2022).
According to PropertyGuru Malaysia’s recently released ‘Malaysia Property Market Report (MPMR) Q2 2022′, the website’s DataSense captured an increase in the Landed Property Sale Price Index for both its quarter-on-quarter (Q-o-Q) and year-on-year (Y-o-Y) performances which recorded a growth of 1.10% and 3.64% respectively.
This is accompanied by a 1.96% decline Q-o-Q in the Landed Property Sale Demand Index while at the same time, it’s Y-o-Y performance improved by 5.21%.
The website’s Country Manager (Malaysia), Shylendra Nathan, explained that the trend in the landed property market demonstrates that potential homebuyers still prefer landed properties. However, the demands are slowed due to financial and affordability issues.
He said that although there are slow improvements to the property market, consumers are still affected by repercussions brought on from the COVID-19 pandemic. Coupled with rising inflation, consumers remain cautious, seeking restabilisation and enhanced job security in this current economic climate.
“The lack of financial incentives are also causing house buyers to be unwilling to move forward with their purchasing plans until Malaysia’s economy stabilises,” he added.
Despite that, he continued by saying that consumers’ sentiments would likely improve as Malaysia’s economy recovers, something PropertyGuru is hoping to see in this year.
With that, he said there is potential for demand to grow in the coming quarters of the year due to Malaysians still resorting to property as a hedge against inflation.
“With the advantage of land value to factor in, the rising prices of landed properties offer larger margins for capital appreciation in the long term,” he added.
Total of unsold properties remain high
In Bank Negara Malaysia’s recent Financial Stability Review H2 2021 , data shows a high number of unsold properties despite the visible improvements to the country’s economy and finance industry.
The review shows more than 180,000 units remain unsold, which Shylendra says have been caused by pre-existing affordability issues, exacerbated due to the pandemic.
This is consistent with the MPMR’s Supply Index, which continued its upward trend, gaining 0.31% Q-o-Q and 19.10% Y-o-Y in Q1 2022 based on the overall volume of listed properties.
With the rising global inflation against the backdrop of the pandemic, the return of demand will cause a bottleneck for vital commodities such as raw materials, thus pushing prices upwards. Malaysia’s current large volume of unsold housing units could represent a final opportunity to snap up properties before a possible hike in development costs.
Increase in high-rise property rental
According to the High-Rise Property Sale Price Index in the MPMR, prices for stratified properties fell by 0.23% Q-o-Q in Q1 2022 while only registering a 0.51% Y-o-Y increase in the same period. However, the supply of high-rise properties continued to increase by 3.25% Q-o-Q and 18.24% Y-o-Y. This indicates a price mismatch against buyer appetite on other factors such as location, facilities, and accessibility.
However, on the rental front, the High-Rise Property Rental Price Index moved up slightly by 0.91% Q-o-Q and inches upwards by 0.20% Y-o-Y, while the High-Rise Property Rental Demand Index registered a 6.08% Q-o-Q increase and 111.23% Y-o-Y jump in the last quarter. This indicates how potential homebuyers have shifted their priorities to renting as an ideal interim option for those who have temporarily put off purchasing plans as they await economic stability.
“The consumer buying appetite is currently suppressed in this current time, as seen evidently with the increase in the High-Rise Property Rental Demand Index. We have seen a steady pattern of millennials expressing a desire for well-located condominiums – however, the lack of take-up and maintenance for these high-rise units, despite the overhang, has shown a price mismatch against current buyers’ appetite”, continued Shylendra.
Despite optimistic signs of improvements in the market and an expected gradual recovery in the second half of the year, homebuyers continue to be bogged down by affordability, inability to secure financing, job security, and overall economic stability. Additionally, with the recent increase in the overnight policy rate (OPR) by Bank Negara Malaysia from 1.75% to 2%, buyers and current homeowners’ existing and future mortgage interest will be affected, further dampening purchasing confidence.
“Therefore, we will likely only see an improvement in consumer sentiment in tandem with the recovery of the economic environment and the availability of government initiatives that will result in better financial security during this period. The “wait-and-see” approach that buyers are taking is further exacerbated by the ongoing political instability and uncertainty on economic and health policies, which further dampens the market. While we await improvement on these external factors, sellers will have to take the initiative to incentivise buyers with attractive packages to spur the market,” he concluded.
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