Despite the ongoing impact of the COVID-19 crisis on the property market, positive takeaways from the market trends in Q4 2020 project a stronger performance in the first quarter of 2021.
Importantly, overall asking prices held steady in the last quarter of 2020 with 0% quarter-on-quarter (QoQ) change from Q3, indicating that prices could swing back into positive territory in the coming months, given the more positive economic outlook as well as the imminent rollout of vaccinations.
Report Highlights
- Get The Guru View
- Price Index Overview
- Supply Index Overview
- Regional Analysis
- What It Means For Those Hoping To Buy/Sell In The Current Market
- Conclusion
- Download The Full Report
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Get The Guru View: Key Findings of the PMI Q1 2021
PropertyGuru Property Asking Price Index Overview
The MPMI, a study that tracks the asking prices in primary and secondary property markets on a quarterly basis, found that overall asking prices (at a national average) registered no notable quarterly percentage change in the final quarter of 2020, staying at 88.60 points in Q3 and Q4 last year.
This indicates a plateauing of downward price movement in the final quarter of last year, a condition that typically preludes a change of direction for asking prices. A closer look at regional activity by the MPMI reveals differences among asking price performances across key markets has ultimately averaged out to an overall zero-sum quarterly change for prices.
While asking prices in Kuala Lumpur saw the most pressure, dropping by 1.80% QoQ, and Johor and Penang inched downward by 0.83% and 0.78% respectively, while Selangor increased with a 0.84% upward tick.
From a year-on-year (YoY) perspective, overall asking prices continued to be in negative territory in Q4 2020, with a slight 0.34% dip compared to Q4 2019. This was an improvement on the 1.49% YoY contraction registered in Q3. In fact, the margin of YoY price decline has been steadily shrinking in consecutive quarters since Q1 2020, and following this trend we should expect to see prices stabilise and gradually return to more positive territory during the course of this year.
PropertyGuru Property Supply Index Overview
Tracking the volume of new supply via listings on PropertyGuru, the MPMI found that the overall supply of new property in the market registered a decline of 2.34% in Q4 2020, following a steep incline of 19.80% in the previous quarter.
However, from a yearly perspective, overall supply continued to move upwards by 0.98% YoY, indicating that the supply of property stock is steadily making its way back into the market despite pandemic-related disruptions.
The supply of new properties dropped in all key regions except in Penang, which registered a sizeable increase of 10.97% QoQ and 16.43% YoY. In contrast, Supply in KL dropped by 8.91% QoQ and 10.20% YoY, while Johor saw a slight dip of 0.42% QoQ and 1.62% YoY. Selangor registered a quarterly decrease of 2.72%, but saw overall supply increase by 6.24% YoY.
According to the most recent National Property Information Centre (NAPIC) report, landed properties dominated the new residential launches with 3,127 units launched in the quarter in review. This would be an addition to the existing overhang units in Johor at 20.4%, Selangor at 15.2% and KL at 10.1%.
Furthermore, properties priced below RM300,000 make up 50.5% of the new residential launches, creating a market that is ripe for affordable home hunters in 2021.
Top Performing Regions and District Analysis
Kuala Lumpur: Downward Trend Continues For Capital District
As a prime hub for luxury metropolitan homes, it comes as no surprise that many of the upmarket properties in KL continue to face downward pressure on prices in the current economic climate.
With little local appetite for highly-priced properties, the downward trajectory of asking prices in the capital district is expected to continue until the overall economy improves.
Asking prices in KL dropped by 1.80% QoQ, continuing a downward trend that began in Q2 2020. From a yearly perspective, the current 2.63% YoY drop follows a declining price trend that began much earlier in Q1 2019, due to subdued international interest and a poor global economy (that predated the COVID-19 crisis).
The current decline in new property supply is also notably more pronounced than other key regions studied by the MPMI, shrinking by 8.91% QoQ and 10.20% YoY.
This suggests that the KL market is actively cooling off in order to mitigate its current stock of unsold properties.
Despite this, there are areas within the KL district that are notably gaining consumer interest, such as the Ampang Hilir which registered a 10.96% gain in asking prices this quarter. Other neighbourhoods that are performing strongly include Damansara Heights and Mont’ Kiara.
Selangor: Prices Return to Positive Territory
At the onset of the pandemic in early 2020, asking prices Selangor stayed resilient by continuing to move upwards before dipping slightly by 1.04% QoQ in Q3 2020. The final quarter of last year saw Selangor prices return to positive territory with a 0.84% QoQ uptick. It also saw prices improve by 2.79% YoY.
Selangor owes much of its resilience to the fact it is the country’s most populous state, which allows it to enjoy sustained demand for residential properties. This factor has likely provided it with a buffer against any drastic price drops and will determine its resilience in the months ahead as the market gradually improves.
In terms of supply, Selangor saw a 2.72% QoQ drop in Q4 2020, compared with the massive 23.55% increase it registered in the preceding quarter.
On a yearly basis, however, it saw a 6.24% YoY increase in the supply of new properties and this upward trend is expected to continue given the large volume of planned supply in upcoming hotspots such as Bandar Rimbayu, Bandar Bukit Raja and Serenia City.
Areas that are witnessing strong demand and improved asking prices in Selangor currently include Damansara Uptown, the Sierra Mas vicinity in Sungai Buloh, and Tropicana Indah in Petaling Jaya, according to MPMI.
Penang: Poised to Make a Comeback
Asking prices in Penang continued to decline at a gradual pace in Q4 2020, dipping by 0.78% QoQ and 1.71% YoY. This is in keeping with a slow price correction trend that has been in place for eight consecutive quarters since Q1 2019, following overheated pricing in previous years.
Notably, Penang has kept to its own pace despite pandemic disruptions and prices there have not witness any of the sharp drops that were seen in other key markets in the second half of 2020, identifying it as a relatively stable market to keep an eye on in the near future.
The supply of new property is on an upward trend, increasing by 10.97% QoQ in Q4 2020 on the 20.30% gains it made in the preceding quarter, and registering the largest supply jump among the key regions covered in the MPMI. Annually, supply saw 16.43% YoY growth, suggesting that developers are confident about renewed property interest in the state going forward.
Penang saw price improvements in Gurney Drive and Jalan Scotland, where asking prices have shot up by 4.4% and 12.23% in recent months, respectively.
Johor: Oversupply Properties Create Long-term Issues
Johor continues to deal with its large overhang of mismatched properties. Much of this stock continues to be either beyond the price range of local buyers or out-of-sync with local tastes, which has prompted market analysts to classify it as a long-term issue that may take years to resolve.
Helping to hasten this process is the consistent decline of asking prices since Q4 2017. The COVID-19 crisis has put more downward pressure on prices, seeing prices decline by 2.97% QoQ in Q3 2020 before contracting by 0.83% QoQ in the last quarter.
From a yearly perspective, asking prices in Johor registered a 4.92% YoY drop, the largest among the four key regions.
Further price corrections in the future may reinvigorate interest for Johor property, especially if its current surplus of luxury condominiums and serviced apartments can be snapped up at bargain prices.
Given the current situation, the 0.42% QoQ drop Johor’s new property supply in Q4 2020 is probably a step in the right direction after supply shot upwards by 18.36% QoQ in Q3. The state also registered a supply decline of 1.62% YoY.
Even in the subdued Johor market, there are bright spots that are performing strongly. These include Bandar Dato Onn in Johor Baru and Kulai in Senai, which have seen an upward movement of median asking prices.
What It Means For Those Hoping To Buy/Sell In The Current Market
Conclusion
Overall, the economy is expected to improve in 2021, specifically in the second half of the year as the impact of COVID-19 vaccination efforts will likely provide a boost to general consumer sentiment. However, it is likely the property market will recover at a slower rate than the overall economy, as improved financial confidence must first be achieved in order to spur consumer demand.
