I. PropertyGuru 2017 Property Outlook Report & Outlook Forum reveals continued market turbulence amidst pricing unaffordability, rising living costs and lack of financing as main issues. Generation Y likely most impacted.
II. Newly established PropertyGuru Property Price Index points to a slight price drop in selling prices with rental market to grow as more buyers opt to rent temporarily due to inability to qualify for loans and the present absolute high prices of homes.
III. Transit Oriented Developments (TOD) will be key factor for property development moving forward.
Bringing together a distinguished panel of industry experts and speakers, the PropertyGuru 2017 Property Outlook Forum provided much-needed insight on the prospects for the Malaysian real estate sector in 2017, especially on the conditions of residential properties given the current challenging scenario that the nation finds itself in.
The Forum also saw the launch of the PropertyGuru 2017 Property Outlook Report which can be downloaded in full via: https://www.facebook.com/propertyguru.my/.
Panellists for the PropertyGuru 2017 Property Outlook Forum 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. Sheldon Fernandez, Country Manager of PropertyGuru Malaysia moderated the session.
Aside from the property market, the panellists also shared frank views on Budget 2017 and its implications to the Malaysian economy and property sector, as well as recent global developments that have impacted the value of the Ringgit Malaysia (RM).
Among the highlights for the event include the launch of the PropertyGuru Property Price Index. It tracks the asking prices of properties in Malaysia – providing house buyers with greater price transparency based on key variables such as location, unit size and unit type (landed or high-rise), freehold or leasehold and so on.
Key Findings & Insights
For 2017, the PropertyGuru Property Price Index indicates a further drop in asking prices. In mid-2015, the average asking price was RM586psf while mid-2016 saw it shift to RM554psf.
With little supporting factors, 2017 is likely to show a similar downtrend – mired by the unresolved issues of unaffordability in home pricing, the high rejection of loan applications and macro-economic issues such as rising living costs and smaller growth in incomes.
The Index predicts a possibility of price dropping a further RM35psf-RM40psf in 2017. This will be particularly evident in high-rise homes where certain segments are facing an oversupply. Homes priced between the RM500,000 to RM700,000 range are likely to see the most number of loan rejections and hence slower sales.
“Based on the combined data from the PropertyGuru Property Price Index and official statistics, 2017 is expected to be another slow year for the property market. 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; and some may be motivated to move their units quickly due to their lack of holding power,” shared Sheldon Fernandez, Country Manager of PropertyGuru Malaysia.
However, given that the property market is influenced by various factors, there are likely to be certain properties, especially landed ones in strategic locations that will maintain their valuations or see marginal price appreciation.
Positive Developments & Upcoming Game-Changers
The market continues to have its bright spots with the rental market expected to remain strong – fuelled by a growing pool of young, aspiring first-time homebuyers who in deferring their home purchase decision, will look to the rental market to provide a roof over their heads while continuing to save for their future home.
Certain locations known for their higher-end rental properties may see rentals reduced due to external factors i.e. an exodus of expats due to the current slump in the oil and gas industry which, has led to more vacant units in the city centre.
In developing homes that meet the budget of first-time homebuyers and Generation Y, developers are likely to continue building more SOHO / studio units in the city centre and other urban centres to keep prices below or within the RM300,000 to RM500,000 range. Unit sizes will range from 450sqft to 850sqft.
On a separate note, the Selangor Housing and Property Board (LPHS) has implemented a price cap for affordable SOHOs / SOVOs / SOFOs at RM230,000, while serviced apartments are capped at RM270,000. The sizes of these units range from 450sqft to 550sqft. The PropertyGuru Property Price Index estimates the mean monthly household gross income for 2015 at RM6,075 per household.
Transit Oriented Developments – Potential Market Catalyst
On a separate note, it was highlighted that Transit Oriented Developments (TODs) will be a future provider of momentum within the property sector. TODs are property development projects with direct connectivity or close proximity to MRT, LRT or monorail stations.
The TOD concept will increasingly be a factor with Prasarana building seven Transit Oriented Development (TOD) projects in Selangor over the next four years. 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.
As the TOD developments emerge, they will set the benchmark for future integrated property developments which will ultimately transform the way Malaysians travel and commute and by default, their lifestyle, employment patterns and more.
It may soon appear that any property development targeted at the middle-income segment will need to adopt a TOD concept to sustain buying interest.
The first MRT line poised to operate by end-2016 and homes within a 1km radius of MRT stations are expected to benefit from price appreciation and improved rental yields. The 51km Sungai Buloh-Kajang MRT line will connect the North and South of Greater KL and is expected to ferry 400,000 passengers daily.
“This is our second Property Outlook Forum and we are pleased to see the continued support of key industry leaders and stakeholders working with PropertyGuru to help people make confident property decisions.
“Like 2016, it’s going to be a challenging year for both the supply and demand side of the property market but by adopting the right strategy, you will be able to weather it through. 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,” shared PropertyGuru Malaysia Country Manager, Sheldon Fernandez.
