PETALING JAYA: Selected areas and segments of the property market in Malaysia are expected to perform well in 2024, but elsewhere there are areas of concern.

Industry experts expect to see sales improve as the people’s spending power recovers and the government’s efforts to attract foreign direct investment (FDIs) bears fruit.

However, this will mostly be confined to the more developed states of Selangor, Penang and Johor as well as the federal territory of Kuala Lumpur.

The smaller and less developed states will still be left behind.

Klang Valley likely to take the lead

A survey by Juwai IQI, an international real estate property transaction group, shows that the buy-to-rent ratio for 2024 is 91.1% for buy and 8.9% for rent, indicating a strong confidence in the real estate market.

Yields are also expected to rise. Group CEO of Juwai IQI Kashif Ansari said prices and rental rates are likely to see an increase of about 10%.

AmBank Research has also expressed optimism for the new year, forecasting an average earnings growth of about 27%.

But most of these transactions will be in Kuala Lumpur and Selangor, with Penang and Johor competing for second spot.

Tang Chee Meng of property management company Henry Butcher said the improved mobility that comes with major infrastructure projects will attract more people to these states, leading to an increase in demand for housing.

Malaysia’s attractiveness as an investment destination for foreign companies seeking to expand in this region will also lead to growth in the industrial property sector, analysts said.

According to JLL Malaysia, demand for real estate for data centres will see strong growth in 2024 given the expected increase in capacity to 750MW from only 200MW today.

Managing director of the real estate services company Jamie Tan said Malaysia is still a small player in the data centre business compared with Singapore and Hong Kong.

“However, the usage of data by individuals and corporations is high, indicating a high potential demand for future data centre projects,” Tan added.

Residential properties, especially those priced below RM500,000 are also expected to sell, but only in Selangor, Kuala Lumpur and Penang.

“(Currently,) about three out of every five transactions are residential purchases and affordable housing is the most popular segment in the market,” Kashif said.

Those priced below RM250,000 and properties in the RM250,000 to RM500,000 category are the most sought after, he said.

Not so hot in smaller and less developed states

However, conditions are not as rosy elsewhere. In Johor, for instance, a large overhang of residential property remains, according to Rahim and Co International Property Consultant CEO Siva Shanker.

It is the same in the small states such as Perlis, Melaka and Negeri Sembilan as well as the less developed states such as Kelantan. These states are likely to register lower property sales in 2024.

In fact, Siva said, the northern and east coasts states are lagging behind in their sales performances.

Analysts also do not expect the commercial segment to do well, even in urban centres such as Kuala Lumpur.

For instance, Tang said, the commercial property segment is likely to be over-saturated in 2024 given the completion of mega projects such as Merdeka 118.

Tan and Tang agreed that apart from an oversupply of new office space, the weak demand for office buildings aged 10 years and above also poses a challenge.

Siva said there is also an oversupply of serviced apartments.

“Many had been built without consideration for actual market demand,” he said.

According to JLL Malaysia, only 24% of residential properties launched in Kuala Lumpur in 2023 have been sold, and all of them are condominiums and serviced apartments.

What can be done

However, there are ways to turn the market around.

For instance, Siva said, the move to convert Forest City into a special finance zone and the establishment of the Johor-Singapore special economic zone (JSSEZ) is a step in the right direction.

In Kuala Lumpur, he said, older office buildings could be upgraded to meet the requirements of current tenants.

Tan and Tang suggested that the government directs FDIs to the less developed states to make it an incentive to urbanise and to raise income levels.