After a long wait, improved economic conditions following the easing of pandemic-related movements have resulted in a more stabilised property sector. Bringing in a conducive environment for home buyers in the third quarter of 2021 (Q3 2021), all key markets are showing an upward price trend this quarter.
However, overall supply registered a sharp drop in this period, indicating hesitancy among sellers in the market, due to low buyer appetite and downward pressure on house prices that were seen in previous months.
In tandem with overall economic activity as well as improving sentiments on job and financial stability, transactional activity is expected to gradually pick up in the coming quarter.
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Get The Guru View: Key Findings of the PMI Q4 2021
Price & Supply Index Overview
The PropertyGuru Malaysia Property Asking Price Index, which tracks the asking prices in primary and secondary property markets on a quarterly basis, stood at 88.67 points in Q3 2021. This represents a 0.92% quarter-on-quarter (QoQ) uptick from Q2 2021, and a slight year-on-year (YoY) gain of 0.08% from Q3 2020.
Notably, asking prices across all four key regions of Kuala Lumpur, Selangor, Penang, and Johor, showed positive growth. This indicates that nationwide recovery could be on the cards, given that this is the first time all four markets registered positive quarterly growth, since the pandemic impacted the sector (starting Q2 2020).
A sharp decline in supply volume registered in Q3 2021, is a reminder that the property market is not entirely moving upwards. The PropertyGuru Malaysia Property Supply Index, which tracks supply via property listings on PropertyGuru, showed that property supply dropped by 6.51% QoQ in the third quarter, despite a positive gain of 11.94% in Q2 2021.
This is also reflected in a marginal 4.99% YoY increase in Q3 2021, in contrast to the double-figure YoY increases in the two previous quarters.
Listing trends on our website suggest that part of the reason for this could be a temporary decrease in supply volume from the secondary market. This is likely due to downward trending prices in H1 2021, with sellers temporarily putting their selling plans on hold for most of the third quarter.
Another factor behind the temporary cooling of the secondary market could have been the difficulty in accommodating physical property viewings while infection rates were still high.
While property companies have accelerated their digital transformation to cater to an end-to-end buying process, about 66% of consumers expressed preference for a combination of virtual and physical viewings, according to the PropertyGuru Malaysia Consumer Sentiment Study H2 2021.
The easing of restrictions in the current quarter will allow more freedom of movement for fully vaccinated individuals. This includes inter-state travel, which will broaden the reach in key economic regions, to would-be buyers seeking to migrate there for better job prospects.
As at end-October 2021, nine states are in Phase 4 of the National Recovery Plan, including Kuala Lumpur, Selangor, and Johor. Seven states are in Phase 3, including Penang.
Top Performing Regions and District Analysis
Kuala Lumpur: A changing pace for prices
Asking prices moved upwards in Kuala Lumpur by 2.04% QoQ in Q3 2021, picking up pace from the 1.56% QoQ increase it registered in the previous quarter. This was also the biggest price increase among the four key regions.
Significantly, the capital district also saw a 1.09% YoY growth in the third quarter, marking the first upward shift in yearly asking prices since it began its downward trend back in Q4 2017.
New developments in established and popular locales (which continue to command good prices) such as Bangsar, Mont’ Kiara, and Sri Hartamas are playing a part in reviving property interest in KL, while the addition of more affordable housing options via government-led initiatives are also making their presence felt.
Big ticket developments such as the Tun Razak Exchange, Bandar Malaysia, and KL Metropolis are among some of the ongoing projects that excite the market in the near future, while having a positive impact on surrounding property prices.
Following the overall supply trend, property supply in KL fell by 7.30% QoQ in Q3 2021. It also dropped by 5.26% YoY, marking its first drop since Q4 2020. This is also due to a lower number of secondary properties being put up for sale, because of downward pressure on pricing.
Selangor: Back on the growth path
Selangor saw its asking prices grow by 1.50% QoQ, improving on the 1.18% registered in the previous quarter. However, its 3.57% YoY spike in asking prices was not only the most significant increase among the four key markets, it also represented the state’s highest growth rate since the Malaysia Property Market Index (MPMI) began tracking price movements in 2017.
Selangor’s large population seems to have kept demand afloat and asking prices resilient over the past few pandemic-impacted quarters. However, the state was one of the worst-hit by COVID-19 infections in the last quarter, which has tampered expectations that it will rebound at a faster pace compared to other states in the country.
Nevertheless, big developments such as the 2,330-acre Kwasa Damansara township in Sungai Buloh will help rejuvenate property interest as the economy improves. The soon-to-be completed MRT3 Line project will also create fresh property appeal for fringe districts.
In line with the overall supply performance, Selangor saw its supply drop by 2.63% QoQ in Q3 2021. However, from a yearly perspective, supply grew by 17.36%, which is also the highest among the four key regions.
Penang: Industrial growth spurs property activity
Asking prices in Penang registered a growth of 1.38% QoQ in Q3 2021, following a slight increase of 0.95% in the preceding quarter. From a yearly perspective, the state saw a 1.25% YoY price growth, in contrast to the negative YoY growth it had witnessed over the past four years.
This change of pace is partly due to a growth in industrial activities, according to developers who are active in the market. Pointing out that the Penang housing market is traditionally driven by owner occupancy, better job prospects are gradually attracting new blood to the state, and creating fresh demand for property.
While the pace of this has been subdued by the ongoing pandemic, it is expected to pick up in unison with increased economic activity following the easing of COVID-19 restrictions.
Furthermore, the recent joint-venture between Penang Infrastructure Corp Sdn Bhd and SRS Consortium Sdn Bhd to undertake the Penang South Island reclamation project and create a Green Tech Park, is expected to draw high-value electric and electronic players.
Also, work on the 132.2-acre Gurney Warf project has commenced, adding value to properties in the surrounding area. The future Penang Medical and Digital Technology Hub are also poised to create more property buzz for the state.
However, in Q3 2021, Penang saw its supply drop by 13.79% QoQ, which is the largest drop since Q4 2017. Despite this, the state’s supply index ticked upwards on a YoY-basis by 0.56%.
Johor: International attention key to success
In Johor, the asking prices rose by 0.15% QoQ, which is significant because it is the first time it has recorded a positive growth on the MPMI. However, prices in the southern state saw a 2.18% YoY drop, which was the smallest margin of yearly decline captured in seven consecutive quarters.
Despite the improved performance of prices, Johor continues to be vocal about lifting the suspension on the Malaysia My Second Home Programme (MM2H). As the economy opens up in earnest, property players in the state point out that the continued suspension of the programme will stifle demand in Johor Bahru’s premier residential market, limiting buyers from Singapore, Vietnam, Indonesia, and China.
According to Johor’s chief minister Datuk Hasni Mohammad, about 70,000 residential properties are currently unsold or abandoned, due to new homeownership rules and the MM2H suspension.
Beyond this issue, two megaprojects are expected to be the primary contributors to the state’s economic recovery efforts in the long term.
One is the Gemas-Johor Bahru EDTP, which will connect the north and south of the Malaysian Peninsula when completed in 2023. Another is the RTS link, a new 4km cross-border rail project that connects Malaysia and Singapore, which has already begun construction and is expected to be completed in 2026.
Meanwhile, Johor’s supply index registered a drop of 12.69% QoQ. Its 13.36% YoY decline is also the largest margin of decline ever recorded by the index.
Overall, the property market is expected to see a gradual but steady improvement in the months ahead, with economic forecasters anticipating a more significant rebound in 2022.
However, in the near term, market confidence will continue to be closely linked to (and heavily influenced by) any positive or negative developments on the COVID-19 front.
Consumers will be wary that until the virus is fully under control, any deterioration of the situation may result in a return to restricted conditions.
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MALAYSIA PROPERTYGURU MARKET INDEX Q4 2021
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