The slowdown in the Chinese economy and reduced external demand have moderated Malaysia’s economic growth, impacting buyer sentiment. In the fourth quarter, the Sale Demand Index experienced a quarter-on-quarter decline of 7.4%.
Despite this, there has been a rise in average listing prices for homes, accompanied by a cautious optimism among sellers regarding the market’s future trajectory. Higher asking prices have redirected buyer interest toward the rental market, sustaining robust demand throughout 2023.
This trend is expected to persist in the near term, although the shift from buyers to renters is likely a temporary phenomenon, with the Government promising support for property seekers.
2023: A Year in Review
The Sale Demand Index signals a decrease in home demand from the peak levels witnessed in 2021, primarily attributed to the satisfaction of pent-up demand. Noteworthy is that, despite this declining trend, the Sale Demand Index for 2023 surpasses the levels recorded in 2018 and 2019.
The main factor contributing to this decline is housing affordability, with half of the respondents in the PropertyGuru Malaysia Consumer Sentiment Study H2 2023 stating their inability to afford a home without government assistance.
The primary hurdle in property acquisition is the high property prices, closely followed by interest rates. As per the same study, the increases in the Overnight Policy Rate (OPR) have led 51% of respondents seeking properties to increase their monthly savings. Concerns about an economic recession rank as the third most significant barrier to property purchases.
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Report Highlights
- Looking Back at 2023
- Key Trends That Will Impact The Property Sector in 2024
- Big Property Bets in 2024
- Should You Buy or Sell Property in 2024?
- Conclusion
Looking Back at 2023
Uncertain Economic Outlook Slowing Sales but Not Housing Prices
The Financial Stability Review for the first half of 2023 by BNM (Bank Negara Malaysia) indicates that households’ capacity to manage debt remains robust, thanks to stable employment and wage growth. Additionally, the prevalence of high-credit-risk loans has decreased, declining from 6.7% in December 2022 to 4.6% by June 2023.
The PropertyGuru Consumer Sentiment Survey for the second half of 2023 revealed that 87% of potential homebuyers are deterred by high property prices, while 66% are discouraged by high-interest rates. Consequently, many individuals are turning to more affordable alternatives, such as renting. In fact, approximately 65% of survey participants are opting to rent due to a lack of savings for home purchases.
Interest Rates Stay Elevated Although Hikes Have Taken a Pause
The interest rates have been maintained at 3% over three consecutive meetings, reflecting the bank’s response to signs of moderating economic growth and a reduction in inflationary pressures. In the third quarter of 2023, headline inflation was recorded at 2.0%, and core inflation at 2.5%, with projections indicating these levels are likely to be maintained into 2024.
The real estate market may experience varied impacts due to the increased interest rates; while some potential buyers may be deterred, regions might see a surge in demand from international investors benefiting from currencies that are currently strong against the ringgit.
Policy Direction: Enhancing Housing Affordability, Accessibility, and Impact from Budget 2024
The 2024 budget allocates RM2.47 billion for housing projects, including RM546 million for 36 People Housing Programmes (PPR). The target is to complete 15 PPRs by 2024, providing housing for an estimated 5,100 individuals.
Additionally, RM1 billion is set aside for a guarantee fund intended to incentivise established developers to complete stalled housing projects. The Housing Credit Guarantee Scheme (HCGS) will see its allocation increased to RM10 billion, with the goal of assisting 40,000 borrowers.
The government is also taking over the previously halted Bandar Malaysia Project, which will include affordable housing options for military veterans.
In an effort to stimulate the tourism and investment sectors, the government is considering easing specific requirements for the Malaysia My Second Home program, aimed at attracting foreign tourists and investors.
The requirement for unanimous agreement from strata title holders for en-bloc sales has been eliminated. This amendment is intended to promote urban redevelopment and boost housing demand, allowing owners to reinvest in new properties following en-bloc sales.
Key Trends That Will Impact the Property Sector in 2024
1) Housing Affordability: Pivoting to Rental
As anticipated in the 2023 Property Market Outlook report, housing affordability has emerged as a significant concern among property seekers.
According to the Consumer Sentiment Study, 49% of respondents were open to giving up access to a gym for a more affordable property, while 46% were willing to forgo children’s playgrounds.
With asking rents continuing to rise, 77% of respondents expressed agreement with the notion that the government should regulate rental prices.
2) Sustainability and Inclusivity
PropertyGuru’s Consumer Sentiment study for the second half of 2023 reveals that 71% of respondents consider climate change when making property decisions, and 62% are receptive to the concept of green homes.
The financial sector is also taking steps to facilitate the transition to sustainable development for real estate developers. Banks are introducing sustainable finance solutions to assist developers in this shift.
3) Service Sector Expected to Remain as Green Shoot
The service sector continues to show expansion, driven by growth in technology, finance, and tourism-related industries. Reports from the National Tech Association of Malaysia (PIKOM) indicate a rising trend in salaries for individuals working in technology fields.
4) Overhang Situation Likely to Improve Further
NAPIC reported there were a total of 25,311 units of overhang units worth RM 17.4billion in Q3 2023, down by 3.7% QoQ in terms of volume and 4.9% in terms of value.
Despite that there are significant overhang units in the market, the supply has progressively reduced. The overhang units were evenly spread out by price range with RM 500k – RM 1million highest at 29.4%.
Big Property Bets in 2024
Despite overall economic uncertainty, some areas have proven resilient due to factors like policy interventions, infrastructure developments, or regional economic strength. If you are planning to start your journey in 2024, let’s look into the big property bets in 2024.
1) Hotspots that Deserve Your Attention
The property views on iproperty.com.my and propertyguru.com.my serve as leading indicators of the real estate market, as they mark the beginning of the property journey.
According to DataSense, Padang Serai, Kedah, witnessed the highest year-on-year growth in December 2023. In June 2023, Japan-based machinery CKD Corporation has completed the land and building acquisition for its new plant in the high tech park.
2) Areas Where There Are Demand Gaps
Our findings revealed that the majority of the top ten areas were located in Selangor and Kuala Lumpur, with the exceptions being Bandar Baru Enstek (Negeri Sembilan), Labu (Negeri Sembilan), and Kangar (Perlis). Notably, both areas in Negeri Sembilan are situated near the Selangor-Negeri Sembilan border, providing convenient access to Kuala Lumpur and the Kuala Lumpur International Airport.
3) Areas That Saw Stronger Demand From Foreign Buyers
Our data from DataSense, based on the location of visitors viewing property listings, indicates that Johor continues to attract the majority of foreign demand. An interesting exception to this trend is Langkawi, Kedah, a popular tourist destination.
Should You Buy or Sell Property in 2024?
One notable feature of Budget 2024 is the government’s decision to eliminate the requirement for en-bloc sales to obtain 100% approval from existing strata title holders, a change that mirrors practices in Singapore.
This modification is anticipated to stimulate the redevelopment of older properties in urban areas, especially in central city locations, thereby fostering urban renewal.
Taking inspiration from the Singaporean model, the rise in en-bloc sales is expected to elevate the demand for homes, particularly landed properties, potentially resulting in an increased willingness among buyers to pay premium prices.
Conclusion
The Gaza conflict has added an extra layer of uncertainty to the overall economy, and as of now, interest rates show no signs of decreasing.
Developers are still contending with high financing and material costs, while owners may be reluctant to sell at lower prices, especially if they believe there is a potential for selling their property en bloc.
Despite this ambiguous outlook, we anticipate that the real estate market’s performance will be varied. Service sectors are expected to continue spearheading economic expansion, making areas with a robust service sector presence likely to remain appealing to home seekers.
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Property Market Outlook 2024Previous Property Market Outlook Reports:
Malaysia Property Market Outlook 2023
After almost two years of the global pandemic that wrecked economic and social activities, 2023 is the year of economic recovery, albeit with a weak outlook.
Malaysia Property Market Outlook 2022
The positive price indicators captured in H2 2021 promises a more stabilised market in the first quarter of the coming year.
Malaysia Property Market Outlook 2021
The property market is widely expected to start recovering, on the back of a more positive outlook for the economy.
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