Property shows no sign of immediate recovery

Overall take-up rate, volume and transaction have remained low as the market needs more time for a full uptick


Despite a few bright spots in the industry, the property sector will need at least two more years to recover because that will be how long the results of current industry adjustment will take to bear fruit.

Consultants CBRE-WTW said developers are reacting to the slowdown in the sector by adjusting their products in line with current consumer needs.

CBRE-WTW MD Foo Gee Jen said while some correction is experienced by certain sectors, especially in the affordable housing segment during the first-half of 2017 (1H17), the over- all take-up rate, volume and transaction have remained low.

“The market still needs more time for a full uptick, approximately two to three years from now, as currently, developers are mobilising and re-strategising their products to meet the market’s demand.

“Industry players in key states such as the Klang Valley (Selangor), Johor and Penang are now concentrating their efforts to introduce more properties priced below RM500,000 in view of the booming demand following a shortage of supply in this segment,” he told The Malaysian Rerserve when contacted.

Foo said the adjustment may take another six months, and the recovery period would only take place in 2018, where volume is expected to pick up.

“Value, however, may not accelerate as quickly as we hope because of the strong headwinds,” he said.

National Property Information Centre latest statistics showed that unsold units for residential properties rose to 17,809 units in the first-quarter of 2017 (1Q17), from 12,268 units in the same period last year.

The House Price Index indicated that Malaysia’s house prices continued to rise, but at a moderate pace in 1Q17 with about 5.3% year-on-year (YoY) appreciation compared to 7% in the preceding quarter.

One bright spot in the sector includes non-residential property.

Real estate consultancy Laurelcap Sdn Bhd ED Stanley Toh Kim Seng said in the immediate term, the affordable residential sector and industrial warehouse space are also expected to see further improvement.

“For industrial warehouses, the rise of the e-commerce has created a demand for physical storage facilities in good location, with good infrastructure and connectivity,” he said.

MIDF Amanah Investment Bank Bhd analyst Jessica Low Jze Tieng said properties priced between RM500,000 and RM1 million were well-received in the first three months of this year with a 7% jump in transaction value, in tandem with a 9% increase in volume.

“On the flip side, property transaction value and volume for property prices below RM100,000 fell by double- digits,” she said.

Many experts also stated that house prices have always been one of the main challenges for the recovery period, despite several policies and measures that are introduced to improve access to end financing, which essentially revolves around the demand.

PropertyGuru Malaysia’s recent Property Market Index showed that in 4Q16 to 1Q17, following a decline in prices, a marginal increase of 0.2% for property prices in Malaysia indicating that the local property sector could be bottoming out.

Quarter-on-quarter, Kuala Lumpur, Selangor and Johor registered upward price movements with increases of 0.3%, 0.3%, and 3.4% respectively.

Penang’s index showed a decline in property prices by 0.7%, which was largely attributed to a reduction in prices and a tapered supply.

The index saw Penang and Selangor record year-on-year (YoY) declines of 4.1% and 2.6% respectively, while Kuala Lumpur recorded 1% YoY growth.

A significant increase of 5.3% was seen for the Johor market, which was attributed to the various mega projects being developed there.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the need to change the mindset among home buyers and potential owners to consider renting as an alternative for housing ownership is essential to stabilise price.

“In tandem with improving housing affordability in the future, buyers’ income growth can also play catch-up with the house prices as their purchasing power will increase over time,” he said.

ProperyGuru’s consumer sentiment survey 2017 also revealed that higher property prices are one of the main concerns impacting Malaysians’ overall decisions in 2017.

According to the survey, 69% of the respondents felt that the country’s economy is underperforming.

The survey also cited that location, safety and unit size remain the top three considerations for property purchase, as 52% of Malaysians would like to buy a home within the next six months either for their own stay or for investment purposes.

Of which, 39% (38% in 2H16) will choose to buy brand new homes while 13% (15% in 2H16) would opt for the secondary market, and 36% intending to buy — indicating a budget of RM300,001-RM500,000.