Developers should consider consumers’ needs and current trends, to ensure the location, amenities and unit size are attractive to Malaysians
by ANIS ZALANI
THE growth of the Malaysian property market looks optimistic this year, despite the projection of slightly lower economic growth due to uncertainties in the external environment, says Deputy Finance Minister II Steven Sim.
The property sector would receive support from accommodative policies, ongoing government assistance, the implementation of measures outlined in the revised Budget 2023, and strategies and initiatives outlined in the 12th Malaysia Plan (12MP), Sim asserted.
The national property market experienced significant growth in 2022, with over 389,000 transactions amounting to RM179 billion.
This marked a 29.5% increase in volume and a 23.6% rise in value compared to the previous year, said Sim in a report in March.
However, based on PropertyGuru’s Malaysia Property Market Report (MPMR) for the second quarter of 2023 (2Q23), there has been a decline in the Sale Demand Index, indicating a drop in property inquiries by 5.6% quarter-on-quarter (QoQ).
Similarly, the Sale Supply Index, as observed through PropertyGuru’s market data and analytics platform, DataSense, has slightly decreased by 0.6%, suggesting that property owners are adopting a more cautious approach and opting to wait and see before making investments.
To get more insights on the matter, The Malaysian Reserve (TMR) reached out to experts in the housing property field such as Malaysian Institute of Estate Agents (MIEA) president Tan Kian Aun and PropertyGuru Malaysia country manager Sheldon Fernandez.
In terms of supply and demand, Tan shared that landed properties in the secondary market are still very much in demand but lack supply especially in the mature area.
However, due to unaffordability, the rental market is also seen to be increasing.
“As for the primary market, supply is still aplenty at the stratified property in the urban area as developers continue to take advantage of the recent Keluarga Malay- sia Home Ownership Initiative (i-Miliki),” he said.
In June, the Finance Ministry (MoF) announced that first-time house buyers will continue to enjoy a 100% stamp duty exemption for purchases not exceeding RM500,000 via i-Miliki as provided for under Budget 2023.
It said a 75% stamp duty exemption will also be given for first-time homeownership for houses priced between RM500,000 and RM1 million under the same initiative.
When asked how the market mismatch impacts housing affordability and accessibility for potential homebuyers in Malaysia, Tan said buyers tend to have a “rent first, buy later attitude”.
He said this is due to the fact that some potential homebuyers cannot afford a house.
“The price of houses and income do not match although honestly, for the last four to five years, house prices have not gone up a lot,” he said to TMR.
Tan shares that landed properties in the secondary market are still very much in demand but lack supply especially in the mature area (source: miea.com.my)
However, he said it is different from the early 2000s when prices could increase by as much as 20% to 50%.
Commenting on the government’s initiative, Tan was of the view that the stamp duty exemption for first-home buyers is a good move as it can be very helpful for those who are probably about to start a family.
“I think the government should continue with this initiative to encourage home ownership,” he said.
However, Tan said affordable or low-cost homes must be at the right locations.
“Otherwise, if it does not benefit the targeted group, then it would be a waste and could lead to overhang and oversupply,” he added.
Apart from that, he opined that the government should provide multiple mixed developments to open more job opportunities by building more facilities and amenities.
He also acknowledged that developers tend to pass development costs to end-users which would become another setback as the price of the houses would increase.
Weighing on the same matter, Fernandez said unconnected market offerings and consumer demand has created a challenging environment for potential homebuyers.
He said one significant factor driving the market is the preference for newly developed properties, which offer modern features and amenities, particularly in prime locations.
This surge in demand for new launches, particularly in sought-after areas, has contributed to a mismatch in the property market and has potentially inflated property prices due to high demand.
“When embarking on the homebuying journey, first-time homeowners find it important to consider various perspectives to find the ideal property that aligns with their preferences.
“Developers should consider consumers’ needs and current trends while planning projects, to ensure the location, amenities and unit size are attractive to Malaysians. This approach can benefit both buyers and sellers,” he told TMR.
Fernandez emphasised that potential homebuyers who are seeking properties in prime locations have the option to explore sub-sale properties commonly found in well-established neighbourhoods, ensuring a stable living environment unaffected by potential changes brought by new developments that could impact the overall quality of the area.
The younger population is finding it increasingly difficult to afford homes, leading to a higher demand for rental properties, says Fernandez (source: Property Guru)
This, he said, allows buyers to acquaint themselves with nearby facilities and amenities, providing them with a comprehensive understanding of the lifestyle they can expect in the vicinity.
As for the market mismatch in the Malaysian housing sector, he said it can be attributed to a complex mix of interconnected factors.
“We have consistently seen potential homebuyers take the ‘wait-and-see’ approach in the last two years in our MPMR reports. This may continue as Malaysians await a better economic outlook, hopefully in the second half of 2023 (2H23),” he commented.
It can be seen in PropertyGuru Malaysia’s Consumer Sentiment Study (CSS) 1H23, where the Property Sentiment Index decreased by two points, reflecting how respondents currently have lower expectations towards the current property market landscape and, as a result, may place more thought before purchasing a home.
He said it is contributed by housing unaffordability issues, higher interest rates, muted outlook on future property prices and current economic instability.
Other than that, Fernandez said economic factors such as inflation, unemployment rates and demographic shifts also play an integral role.
“The younger population, for instance, is finding it increasingly difficult to afford homes, leading to a higher demand for rental properties,” he said.
Asked about current trends and demand patterns in the Malaysian housing property market, Fernan- dez shared that global inflation has significantly impacted the economy, increasing the demand for more affordable housing options.
In response, the government introduced the Kuala Lumpur Federal Territory Madani Neighbourhood Scheme programme, a new initiative aimed at making affordable housing more accessible to city dwellers.
This initiative aims to assist three income groups, namely the middle 40% income group (M40), bottom 40% income group (B40) and people experiencing poverty, all of whom earn less than RM7,000 per household.
Additionally, the government is providing support to young individuals and newlyweds under the age of 30 with an income of RM4,000 or less.
Fernandez said with the increasing adoption of remote work and rowing interest in properties in suburban areas and other major cities.
“Locations like Johor Baru, Johor, are seeing a surge in demand due to their comparative affordability, improved infrastructure and quality of life compared to congested city centres. According to our MPMR 2H23, Johor takes the crown for the most-viewed residential properties in 1Q23.
“Johor’s development surge is anticipated to persist, fuelled by last year’s RM51.1 billion investment in data centres. As a burgeoning digital hub, Johor is gaining traction in its real estate market. The prospect of new job opportunities may entice more Malaysians to relocate to the peninsula’s southern region,” he said.
As for the rental market trend, Fernandez explained that the indexes in the rental market mirrored the trends in the property sale market, tracking a decrease in the Rental Demand Index by 6.3%.
This, he said, is likely due to the substantial increase in rental prices, with the Rental Price Index rising by 4.7% QoQ.
However, he said the rise in rental prices did not go unnoticed and the Selangor state government has announced plans to look into the feasibility of expanding its Smart Rental Scheme to low-cost housing.
Fernandez added with the growing trend of urban migration, affordability becomes a crucial concern for potential homeowners as developers and landlords have the opportunity to repurpose unsold properties into co-living spaces.
This, he said, can be done through the offering of shared living arrangements as residents can benefit from the lower costs while still enjoying some level of privacy.
On the other hand, Fernandez said introducing a rent-to-own concept is another potential strategy for developers.
This approach, he said, allows aspiring homeowners to rent a property for a specified period after which they can purchase it at an agreed-upon sales price. This provides flexibility and helps bridge the gap between renting and homeownership.
“The shift towards remote work, accelerated by the Covid-19 pandemic, has made home offices and reliable Internet connections essential and the developers should consider incorporating dedicated workspace areas and ensuring high-speed Internet connectivity in their property designs to cater to the needs of remote workers,” he said.
Elaborating on the matter, he said developers should priori- tise connectivity, facilities and surrounding infrastructure to create a comprehensive living experience for tenants and property owners by considering the overall lifestyle needs of buyers.
With this, he said it can help the developers to create appealing and desirable living environments.
Fernandez concluded that property developers must prioritise aligning their offerings with the evolving demands of homebuyers to thrive in Malaysia’s dynamic housing market.
“Developers that successfully adapt to these changing needs and preferences will be better positioned to thrive in Malaysia’s dynamic housing market.
“However, balancing these adaptations with other factors like cost, location and market demand is crucial to ensure the project’s overall viability and success,” he said.
This article first appeared in The Malaysian Reserve weekly print edition
Source: The Malaysia Reserve
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