2017 property market rebounded slightly on strong steady economic growth

Positive growth helps restore confidence on the demand side, as shown by the improved performance of loan applications and the non-residential market


THE past two years have been quite a challenge for the Malaysian property market, despite a rather steady economic growth that was recorded in 2017.

According to the Property Market Report 2017 by The Valuation and Property Services Department (JPPH), 2017 witnessed 311,824 transactions worth RM138.84 billion, which is a year-on-year (YoY) 2.7% decline in market activity and a 3.8% decrease in market value.

The report by JPPH, a body under the National Property Information Centre, also revealed that the smaller declines in both market activity and value indicated that the property market is gradually adjusting to the changing economic landscape.

The report stated that the positive economic growth had helped restore confidence on the demand side, as shown by the improved performance of loan applications and the non-residential market.

Loan applications for the purchase of residential properties increased by 15% YoY, while loan approvals moved in tandem by 15.9% YoY.

In the non-residential sector, loan applications increased by 7.6% YoY against loan approvals that declined by 5.4% YoY.

Although loan approvals for nonresidential purchases continued to decline, the rate of decline also reduced gradually from a 24.6% YoY contraction in 2015, to 14.3% YoY contraction in 2016, and a 5.4% YoY contraction in 2017.

The report also stated that the residential property segment continued to support the overall sector with a 62.4% market share, followed by agriculture property with a 22.5% share.

Meanwhile, mixed-market activity movements were recorded across the subsectors. Industrial, agriculture and development land saw marginal upward movements of 0.2% to 2.2%, while the residential and commercial subsectors recorded otherwise — both down by 4.1% and 6.6% respectively.

In terms of value, the residential subsector recorded an increase of 4.4% YoY, while development land recorded a higher 18.8% YoY rise due to several major land deals, notably in Bandar Malaysia and the Tun Razak Exchange, with some in 2016 and 2015 respectively, but concluded in 2017.

Residential Segment
The segment recorded a total of 194,684 transactions worth RM68.47 billion last year. The transactions were 4.1% lower YoY in volume, but marginal up 4.4% YoY in value.

According to the report, performance across the states was mostly weak except for Putrajaya, Negri Sembilan, Kelantan and Sabah.

On price range, the demand continued to focus on the RM200,000 and below price levels, which accounted for nearly 45% of the residential market volume.

Between 2010 and 2012, this price range used to account for more than 60%, to as high as 70%, of the total market activity. However, in recent years, its market share has declined to between 45% and 50%.

Houses in the higher price range of RM500,000 to RM1 million saw an upturn as this market share grew from 5.1% in 2010 to 13.1% in 2017.

The report stated that the phenomenon explains the pressing issue on affordability as more houses are offered at higher prices in the market, both primary and secondary.

The residential primary market also made a comeback in 2017, indicating sentiment of the property market future outlook.

The year saw 77,570 units of new launches, higher than those recorded in 2015 (58,411 units) and 2016 (52,713 units). Sales performance was, however, moderate at 32.6%.

By state, Kuala Lumpur (KL) recorded the highest number of new launches in the country with over 22,000 units launched.

KL’s sales performance was, however, at a low 19.5%. The report stated that it was an unprecedented record for the state to ever record such a high number of new launches.

All the newly launched projects comprised condominium/apartment units and the majority were in the price range of between RM400,000 and RM500,000 (26%), and RM250,000 and RM300,000 (25.9%).

Selangor ranked second with 13,522 units launched and secured more than 45% sales performance.

Condominium/apartment and two- to three-storey terrace formed 44.3% and 39.7% of the total launches respectively.

The former was mainly in the RM250,000 to RM300,000 range, while the latter was in the higher range of RM500,000 to RM1 million.

Johor stood third with 7,926 units launched securing 44% sales performance. Most of the state’s new launches comprised two- to threestorey terrace (61.6%) priced between RM500,000 to RM1 million.

The increased number of new launches seemed to indicate an upside sentiment among developers. However, buyers’ sentiment did not move in tandem with the increase in launches, as evident by the growing numbers of overhang properties.

The volume of residential overhang grew by 67.2% YoY to 24,738 units, while in value term grew even higher at 82.8% YoY to RM15.64 billion in 2017.

Johor reported the highest level of overhang in residential properties in the country, accounting for 17.7% (4,376 units) of the total.

Penang and Kedah came second and third with 15.8% (3,916 units) and 15.3% (3,783 units) of the national overhang total respectively.

In Johor, the majority of the overhang comprised condominium/ apartment units which were priced between RM500,000 and RM1 million.

The report stated that house prices also continued to record a steady increase.

The Malaysian House Price Index stood at 187.4 points, up by 6.5% YoY against 2016.

Meanwhile, the residential rental market remained stable with increases recorded in established neighbourhood and areas adjacent to transit rail lines namely the light rail tansit and mass rapid transit (MRT).

In Selangor, double-storey terraced houses in Petaling Jaya and Subang Jaya secured higher rental rates, ranging from RM1,200 per month to as high as RM3,500 in Bandar Utama.

Similar rental trend was observed in KL. Single-storey terraced houses in the Bangsar locality were securing rental of RM3,000 per month, similar to that of double-storey terraced houses.

High-rise units mainly recorded marginal gains in rental.

Commercial Segment
The commercial property market activity continued to decline as there were 22,162 transactions recorded worth RM25.44 billion in 2017, down by 6.7% YoY in volume and 29.2% YoY in value.

The significant decline in total commercial transactions value was due to the fewer major dealings recorded in the review year.

The report revealed that performance across the states was mixed with seven states recording growth, while nine others recorded contraction.

Shops subsector formed the major component in the commercial property sector, accounting for 55.6% of the total.

There were 12,310 transactions recorded worth RM9.63 billion in 2017, down by 4.4% YoY in volume, but increased by 2.5% YoY in value.

By type, two-storey shops took up slightly more than half of the total shop transactions, followed by three-storey shops with a 28.9% market share.

By state, Johor retained its leading position with an 18.7% share, while Selangor came second with 16.3% share.

In terms of value, Selangor superseded Johor with 26% of the total shop transaction value.

The report stated that the number of unsold shops was also reduced.

There were 4,546 units worth RM3.3 billion unsold last year, down by 10.3% YoY in volume. However, the overhang value increased by 16.3% to RM3.3 billion as more than 62% of these overhang units were in the RM750,000 and above category.

The 2017 report recorded 11 shopping complex transactions; three in 2017, seven in 2016 and one in 2015.

The retail subsector’s performance was stable at 81.3% (2016: 81.4%), recording an annual take-up of more than 6.78 million sq ft — KL, Selangor, Johor and Penang saw a significant amount of take-up as its newly completed shopping complexes secured commendable occupancy.

Johor led with a take-up of nearly 2.82 million sq ft, followed by Selangor (1.17 million sq ft), KL (one million sq ft) and Penang (778,883 sq ft).

Despite the good take-up, KL observed a marginal decline in its occupancy rate to 85.3% (2016: 86.8%).

The occupancy rate in Johor and Penang improved to 79.9% (2016: 73%) and 72.6% (2016: 69.9%), whereas Selangor stabilised at 85.4%.

In KL, rentals of retail space were generally stable with isolated upward movements recorded in selected complexes.

Suria KLCC remained in a class of its own, securing a rental rate of more than RM2,000 per 10.76 sq ft for its lower ground floor units.

In Selangor, rentals of retail space were generally stable. Also 2017 recorded 18 transactions of purpose- built office buildings with overall occupancy rate of 83.3% (2016: 82.3%), with a high take-up of over 8.28 million sq ft (2016: 3.07 million sq ft).

As at end of last year, there were nearly 231 million sq ft of existing office space from 2,493 buildings.

There were another 62 buildings (23.14 million sq ft) in the incoming supply and 30 buildings (7.86 million sq ft) in the planned supply. KL dominated the future supply.

The office market continued to record stable rental trend. In KL, office space in the Petronas Twin Towers sustained premium rentals ranging from RM97 to RM129 per 10.76 sq ft. Office space in the Integrate Tower also recorded a higher range of RM99 to RM102 per 10.76 sq ft. In Selangor, prominent buildings with premium rentals of more than RM50 per 10.76 sq ft are located in Petaling Jaya/Damansara locality.

Looking ahead, the property market is expected to stabilise in 2018, having endured challenging moments in the last two years.

The forecast economic growth, accommodative monetary policy as well as continuous incentives for the housing sector will help sustain the momentum in the sector.

Bank Negara Malaysia statistics had also forecast that the economic growth would remain favourable in 2018, supported by domestic demand.

The report stated that early 2018 also saw the raise in the Overnight Policy Rate (OPR) by 25 basis points to 3.25% to normalise the degree of monetary accommodation.

The raise in the OPR was expected as the rate had been maintained at 3% since July 2016.

Despite the hike in the OPR, the positive development on the economic front is a good sign for the property market.

The allocation of RM1 billion for the development of the five main economic corridors is expected to help spur the property market within the vicinity.

Among the projects expected to gain from the allocation — include Proton City, Educity and Youth City in Tanjung Malim, Bukit Kayu Hitam Duty-Free Zone and the construction of port and industrial park in Tok Bali, Kelantan, as well as access road to Baleh Dam, Sarawak.

Additionally, the ongoing and upcoming infrastructure projects, namely the East Coast Rail Link, MRT Line 2 from Sungai Buloh and the Circle Line are seen as catalysts for future developments and potential value growth in property prices and rentals.