Malaysia’s Property Market: A Year in Review and 2024 Outlook
The Chinese economic slowdown and reduced external demand have moderated Malaysia’s economic growth, affecting buyer sentiment. In the fourth quarter, the Sale Demand Index experienced a 7.4% decline compared to the previous quarter. Despite this, average listing prices for homes have risen, reflecting cautious optimism among sellers. Higher asking prices have shifted buyer interest towards the rental market, sustaining robust demand throughout 2023. This trend is expected to continue in the short term, though it is likely a temporary phenomenon as the Government promises support for property seekers.
Reflecting on 2023
The Sale Demand Index signals a decrease in home demand from the peak levels witnessed in 2021, primarily due to the satisfaction of pent-up demand. However, it is noteworthy that the Sale Demand Index for 2023 surpasses the levels recorded in 2018 and 2019. The main factor contributing to this decline is housing affordability, with half of the respondents in the PropertyGuru Malaysia Consumer Sentiment Study H2 2023 stating their inability to afford a home without government assistance. High property prices and interest rates are the primary hurdles in property acquisition, with increases in the Overnight Policy Rate (OPR) prompting 51% of respondents to increase their monthly savings. Economic recession concerns also rank as a significant barrier to property purchases.
The PropertyGuru Consumer Sentiment Survey for the second half of 2023 revealed that 87% of potential homebuyers are deterred by high property prices, while 66% are discouraged by high-interest rates. Consequently, many individuals are turning to more affordable alternatives, such as renting. Approximately 65% of survey participants are opting to rent due to a lack of savings for home purchases.
Interest Rates and Economic Outlook
Interest rates have been maintained at 3% over three consecutive meetings, reflecting the bank’s response to signs of moderating economic growth and a reduction in inflationary pressures. In the third quarter of 2023, headline inflation was recorded at 2.0%, and core inflation at 2.5%, with projections indicating these levels are likely to be maintained into 2024. The real estate market may experience varied impacts due to the increased interest rates; while some potential buyers may be deterred, regions might see a surge in demand from international investors benefiting from currencies that are currently strong against the ringgit.
Policy and Budget 2024
The 2024 budget allocates RM2.47 billion for housing projects, including RM546 million for 36 People Housing Programmes (PPR), with a target to complete 15 PPRs by 2024, providing housing for an estimated 5,100 individuals. Additionally, RM1 billion is set aside for a guarantee fund to incentivize developers to complete stalled housing projects. The Housing Credit Guarantee Scheme (HCGS) will see its allocation increased to RM10 billion, aiming to assist 40,000 borrowers. The government is also taking over the previously halted Bandar Malaysia Project, which will include affordable housing options for military veterans.
To stimulate the tourism and investment sectors, the government is considering easing specific requirements for the Malaysia My Second Home program, aimed at attracting foreign tourists and investors. The requirement for unanimous agreement from strata title holders for en-bloc sales has been eliminated to promote urban redevelopment and boost housing demand, allowing owners to reinvest in new properties following en-bloc sales.
Key Trends for 2024
Housing affordability remains a significant concern among property seekers. According to the Consumer Sentiment Study, many respondents are willing to forgo amenities like gyms and playgrounds for more affordable properties. With asking rents continuing to rise, 77% of respondents believe the government should regulate rental prices.
Sustainability and inclusivity are becoming increasingly important in property decisions, with many considering climate change and being receptive to the concept of green homes. Banks are also introducing sustainable finance solutions to assist developers in this transition.
The service sector, driven by technology, finance, and tourism, continues to show expansion, with rising salaries in technology fields. Despite the overhang situation, where there are significant overhang units in the market, the supply has progressively reduced.
Big Property Bets for 2024
Despite overall economic uncertainty, some areas have proven resilient due to factors like policy interventions, infrastructure developments, or regional economic strength. Hotspots like Padang Serai, Kedah, and areas near the Selangor-Negeri Sembilan border are attracting interest. Johor continues to attract foreign buyers, with Langkawi also drawing attention as a popular tourist destination.
Should You Buy or Sell Property in 2024?
The government’s decision to eliminate the requirement for en-bloc sales to obtain 100% approval from existing strata title holders is anticipated to stimulate the redevelopment of older properties in urban areas, fostering urban renewal. This change mirrors practices in Singapore and is expected to elevate the demand for homes, particularly landed properties, potentially resulting in an increased willingness among buyers to pay premium prices.
Conclusion
The Gaza conflict has added an extra layer of uncertainty to the overall economy, and as of now, interest rates show no signs of decreasing. Developers are still contending with high financing and material costs, while owners may be reluctant to sell at lower prices, especially if they believe there is a potential for selling their property. Despite this ambiguous outlook, the real estate market’s performance is expected to be varied, with service sectors continuing to spearhead economic expansion, making areas with a robust service sector presence likely to remain appealing to home seekers.
