Home Prices Not To Drop Significantly On Continued Demand From First-Time Homebuyers

September 30, 2021

Local Buyers To Drive Demand In Residential Property Market

Bank Negara Malaysia (BNM) does not expect home prices in Malaysia to decline significantly as demand from first-time buyers for affordable homes remains strong and developers introduce more affordably-priced projects.

In its Financial Stability Review for 1H 2021, BNM noted that the number of housing transactions had declined this year, reported Malay Mail.

National Property Information Centre (NAPIC) data showed that 75,300 homes were sold with an average transaction value of RM340,100 in 1H 2021. This rose to 116,000 homes with an average transaction value of RM347,000 in 2H 2020, before dropping to 92,000 housing transactions in 1H 2021.

Nonetheless, a higher average transaction value was registered in 1H 2021 at RM375,000.

BNM said the slower housing transaction in 1H 2021 comes as the effect from the positive response to the homeownership incentives offered by the government had already subsided.

Moreover, the market activity between April and June was also weighed down by the stricter movement restrictions as well as the operational frictions caused by the hike in COVID-19 cases.

Despite the slower market activity, BNM pointed that the average transaction values had increased at a stronger pace, with transactions for homes priced below RM500,000 accounting for over 80% of total housing transactions.

With this, the number of unsold homes increased from 167,104 units in Q4 2020 to 181,460 units in Q2 2021.

BNM attributed it mainly to homes priced above RM300,000 as well as to under-construction serviced apartments, and partly to new housing projects that were launched in previous quarters, which witnessed slower sales.

However, it noted that market watchers remain optimistic, expecting a pick up in activity once movement restrictions are gradually eased and economic activities recover, as seen in 2H 2020.

And with developers anticipated to offer new homes with more affordable prices and the continued demand from first-time homebuyers, BNM sees a reduced risk for a significant drop in home prices.

“Incoming supply of newly-launched residential properties would likely shift towards the mass market price segments, as seen in the higher share of properties priced at RM500,000 and below,” it said as quoted by Malay Mail.

In 2015 to 2019, the average percentage of such houses stood at 65.9%. In 1H 2021, it stood at 71.6%, said BNM.

“Such adjustments will continue to reduce demand-supply mismatches and improve overall housing affordability,” it stated.

“Along with sustained demand among first-time house buyers, this is expected to mitigate risks of a significant house price correction,” added BNM.


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