The COVID-19 ongoing damage since the beginning of the year has made its presence felt in the third quarter of this year, with the Malaysia Property Market Index (MPMI) registering a drop in asking prices across key markets while overall supply saw sharp spikes in Q3 2020.
On the upside, as prices are likely to move downward further in the coming months, this may unlock pent-up demand for more affordably priced homes – especially in this low-price low-interest rate climate – which in turn could generate enough demand to slow the rate of declining prices.
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Get The Guru View: Key Findings of the PMI Q4 2020
PropertyGuru Property Asking Price Index Overview
The MPMI, a study which tracks the asking prices of properties in the primary and secondary markets on a quarterly basis, found that overall asking prices edged downwards in Q3 following two consecutive quarters of marginal gains this year.
Dipping slightly by 1.34% QoQ (quarter-on-quarter), this is in contrast to the 0.38% QoQ increase registered in Q2 and 0.63% QoQ increase in Q1 this year.
Signalling that this could be more than a momentary dip for the first time this year, all key markets saw a fall in prices, even during a period of relatively low Movement Control Order restrictions (between July and September).
The sharpest decline was registered in Johor followed by Kuala Lumpur and Selangor. Penang saw the least movement in prices.
The downward trending prices captured by the MPMI correlate with the latest numbers from the National Property Information Centre (NAPIC). In its H1 2020 market report, the Malaysian House Price Index saw a marginal quarterly decline of 0.7% from the first quarter and from an annual perspective, the index may have moved up by 0.4%.
PropertyGuru Property Supply Index Overview
The MPMI, which tracks the volume of new supply via listings on PropertyGuru, found that the overall supply of new property into the market rose by 19.80% QoQ. It also captured a growth of 10.14% on a YoY-basis, which a better indication of an upwardly moving trend.
Among the key regions, Selangor saw the largest increase followed by Penang and Kuala Lumpur and Johor.
In its H1 2020 report, NAPIC revealed that Malaysia’s residential overhang climbed up 3.3% to 31,661 unsold completed units worth RM20.03 billion during the first half of 2020, from 30,664 units valued at RM18.82 billion over the same period last year. More than half of the current overhang stock is made up of condominiums and apartments.
According to NAPIC, newly launched homes priced from RM100,000 and RM500,000 dominated the market during the period under review.
Homes priced between RM200,000 and RM300,000 lead supply with 4,022 units (30%), while those priced at RM400,000 and below accounted for 92% of total sales.
Top Performing Regions and District Analysis
Kuala Lumpur: Continuous Drop in Asking Prices
Asking prices in Kuala Lumpur continued on a downward trend that began in Q2 2020, moving from 95.38 points on the MPMI to 94.09 in Q3. The 1.35% QoQ drop was slightly more accelerated than the 1.28% QoQ dip registered in the previous quarter.
From an annual perspective, Kuala Lumpur saw a 2.24% YoY drop in Q3, which is a slight improvement on the 2.25% YoY decline it experienced in the last quarter.
Part of the reason for this has been waning interest among foreign investors that began with poor global economic conditions prior to the onset of the pandemic.
Certain districts in key states have been generating more attention in recent months, according to online search activity at PropertyGuru, resulting in a more positive sentiment of buying a home – as they’re coming out of the wait-and-see mentality.
Key areas in KL that have been generating attention in recent months, according to online search activity at PropertyGuru, particularly Bukit Jalil and Cheras.
Selangor: There’s Confidence in the Long-term Prospect of the State
In spite of this, Selangor’s strong price performance in the first half of the year helped soften the blow on a year-on-year basis and the state remains in positive territory in Q3 with a 1.85% YoY uptick.
With commercial activity allowed to proceed – albeit within highly restricted perimeters – we can expect supply to grow beyond the 23.55% QoQ incline it registered in Q3 2020. From a yearly perspective, this represented an 18.43% YoY growth in supply.
While there is cause for concern on the supply front in Selangor, because the state is dealing with the second largest overhang statistic (4,865 units) in the country, market watchers continue to be confident about the long-term prospect of the state.
As Selangor is also proving to be the most progressive region, developers active in the state have been aggressively turning to digital marketing in order to promote their projects.
This, in turn, has caused a big hike in key areas generating interest, according to PropertyGuru data that includes Damansara, Petaling Jaya, Subang Jaya and Shah Alam.
Penang: Stable Asking Prices Indicates A Safe Haven for Investment
The MPMI found that the state registered the smallest change in asking prices among the four key regions in the country, with a slight dip of 0.64% QoQ and 1.30% YoY.
The relative stability of Penang prices in the current climate identifies it as potential safe haven for those who wish to preserve wealth through property investment.
Supply of property in Penang saw a marked increase of 20.30% in Q3, suggesting growing confidence among developers.
Previous quarters, dating as far back as 2018, saw many drops in supply numbers with periodic increases that barely surpassed the 10% mark.
However, a steady increase of enquiries for Penang properties since Q2 this year, especially in the George Town, Bayan Lepas and Butterworth areas are indicating that Penang is still sizzling among buyers and investors alike.
Johor: The Largest Price Drop With the Highest Overhang Supply
In Q3 2020, Johor registered the sharpest decline in asking prices, falling 2.97% QoQ and 5.58% YoY.
Johor also has a large oversupply situation to cope with. It currently has the largest number of overhang properties in the country with 6,166 unsold completed units in the market.
The MPMI found that supply in the state continued to grow in Q3, registering an 18.36% QoQ hike and an increase of 3.56% YoY.
Downward trending prices may actually be a boon for Johor in the current climate, putting it on better footing to appeal to the domestic market in the short- to mid-term.
And when it comes to key areas within Johor, those located in Johor Bahru City, Pasir Gudang and Iskandar Puteri are among the places that are receiving the most attention in the state.
What It Means For Those Hoping To Buy/Sell In The Current Market
- On the residential front, a broader decline in house prices is expected due to a deterioration in income and weaker demand conditions.
- This increases risks to financial stability, given that loans for the purchase of residential properties account for the bulk of banks’ total property-related exposures.
- Moving forward, the market will have to be more acutely aware of specific demand to remain relevant to buyers.
Overall, the year has proven to be a turbulent one on all fronts for the property market. While a pre-existing subdued economic climate set the tone for the beginning of the year, clearly the impact of the pandemic has had a marked impact on demand, supply and prices.