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Malaysia property market prospects discussed at PropertyGuru forum
The property market in Malaysia continues to face challenges, albeit with a few bright spots.
The Malaysian real estate sector faces challenging conditions, and its prospects for next year were discussed at the PropertyGuru 2017 Property Outlook Forum held yesterday (1 December).
Moderated by PropertyGuru Malaysia’s Country Manager Sheldon Fernandez, the forum’s panellists consisted of Dato’ Charon Mokhzani, Managing Director of Khazanah Research Institute (KRI); Datuk Seri FD Iskandar, President of the Real Estate and Housing Developers’ Association Malaysia (REHDA); Prem Kumar, Executive Director of Jones Lang Wootton; Gary Chua, CEO of SMART Financing, and Chris Tan, Managing Partner of CHUR Associates.
Apart from the property market, topics discussed at the forum included Budget 2017 and its implications for the Malaysian economy and property sector, as well as recent global developments that have impacted the value of the Ringgit Malaysia (RM).
At the same time, the PropertyGuru Property Price Index was introduced at the event. The index tracks the asking prices of properties in Malaysia, providing buyers with greater price transparency based on key variables such as location, unit size and unit type and tenure. It also indicates a further drop in asking prices in 2017; prices dropped from an average of RM586 psf in mid-2015 to RM554 psf in mid-2016.
Ongoing affordability issues, the high rate of rejection of loan applications, and macro-economic issues such as rising living costs and smaller income growth mean prices are likely to keep falling in 2017 (by around RM35 psf to RM40 psf), especially for high-rise homes, where certain segments are facing an oversupply. Homes priced between the RM500,000 and RM700,000 are likely to see the most number of loan rejections, leading to fewer sales.
Based on the index and official statistics, Fernandez said “2017 is expected to be another slow year for the property market”. He added: “With the completion of many new developments flooding the market in 2017, there is likely to be a drop in selling price due to the lack of demand; some may be motivated to move their units quickly due to their lack of holding power.”
Still, there are likely to be certain properties — particularly landed homes in strategic locations — that will maintain their valuations or even see marginal price appreciation. Malaysia’s rental market expected to remain strong, thanks to a growing pool of young, aspiring first-time home buyers who, in deferring their home purchase decisions, will look to the rental market.
Certain locations known for their higher-end rental properties may see rents reduced due to external factors, i.e., the current slump in the oil and gas industry, which has seen many expats leave the country and therefore resulted in more vacant units in the city centre.
In developing homes that fit the budget of first-time home buyers and those from Generation Y, developers are likely to continue building more SOHO / studio units in the city centre and other urban centres to keep prices below (within the RM300,000 — RM500,000 range). Unit sizes will range from 450 sq ft to 850 sq ft.
Furthermore, the Selangor Housing and Property Board (LPHS) has implemented a price cap for affordable SOHOs, SOVOs and SOFOs at RM230,000, while serviced apartment prices are capped at RM270,000. The sizes of these unit range from 450 sq ft to 550 sq ft each, and the PropertyGuru Property Price Index estimates the mean monthly household gross income as of 2015 at RM6,075 per household.
For Singaporeans, this could prove advantageous, whether they are looking to invest or to live and work in Malaysia. Thanks to the falling RM against the Singapore dollar, buying property in Malaysia now presents especially good value for money. Of course, they must also be prepared to invest long-term, as it may be some time before they can see positive returns on their investments (ROI).
Transit Oriented Developments (TODs) were also identified as a boon to Malaysia’s property sector. Essentially, TODs are property development projects with direct connectivity or close proximity to MRT, LRT or monorail stations.
The TOD concept will become more important, with Prasarana building seven TOD projects in Selangor over the next four years. In fact, any development targeted at the middle income segment will most likely need to adopt a TOD concept to sustain buying interest.
The High Speed Rail (HSR) is expected to commence construction in 2018, and talks of a similar HSR project to Bangkok from Malaysia have emerged. Additionally, the 51km Sungai Buloh-Kajang MRT line will connect the North and South of Greater KL and is expected to transport 400,000 passengers daily.
Fernandez said: “Like 2016, it’s going to be a challenging year for both the supply and demand sides of the property market, but by adopting the right strategy, you will be able to weather it. For those looking for price comparison and transparency, the newly launched PropertyGuru Property Price Index is a good place to start for assessing market valuations.”
For more detailed information on Malaysia’s property market prospects for next year, download the full PropertyGuru 2017 Property Outlook Report at bit.ly/2gb8vVL
Cheryl Marie Tay, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories, email cheryl@propertyguru.com.sg
