Property price index rises to highest level in 7 quarters

The property sector has been languishing due to oversupply of commercial towers, malls and financing difficulties


Malaysia’s property price index rose 5.8% year-on-year (YoY) in the first three months of this year, the highest level in the last seven quarters as the sector showed signs of recovery, but short of a comprehensive one.

The country property sector has been languished due to oversupply, mismatch of demands and prices of commercial towers and malls and financing difficulties.

Global property consulting firm Knight Frank’s Global House Price Index 1Q18 ranked Malaysia at 20 out of 57 countries, with a 2% increase and 0.1% marginal decrease in house prices for the last six and three months respectively.

The marginal decrease showed house prices have hit the bottom and are slowly bouncing back.

Knight Frank Global House Price Index for Malaysia rose 7.2% in the second quarter of 2016 (2Q16), but have been sliding from 5.5% to a low of 5.1% in the last six quarters.

The banking sector approved RM29.6 billion loans for residential and non-residential properties for the January-March 2018 period with RM8.4 billion approved for homes for March 2018, the highest level in four months.

But enthusiasm of the property sector remains muted despite the removal of the Goods and Services Tax and renewed interest following the change of government. Property overhang continues to shape the market as developers are keen on a wait-and-see attitude before investing into new projects.

The Knight Frank research showed the Global House Price Index rose 4.8% in the January-March 2018 period as house prices rose in 86% of the 57 countries tracked by the index.

Despite the rise, only 9% of the markets tracked registered growth above 10%, down from 18% recorded a year ago.

Nicholas Holt

Despite the prospect of increasing interest rates, limited new supply will underpin continued price growth through 2018, says holt (Pic by Ismail Che Rus/TMR)

Knight Frank head of research for Asia Pacific Nicholas Holt said, while most Asia-Pacific markets saw moderate house price growth in 1Q18, Hong Kong’s 4.6% quarter-on-quarter and 14.9% YoY growth made it the fastest riser globally over the last 12 months.

“Despite the prospect of increasing interest rates, limited new supply will underpin continued price growth through 2018,” he said in a statement.

Hong Kong leads the index for the first time since the 2Q15, with average prices ending 14.9% higher YoY in 1Q18. Since the index was first published in 2008, Hong Kong held the top spot on 10 different occasions — more than any other territory tracked.

Malta occupies the second spot (13.6%) in the rankings, while Iceland (13.2%), Ireland (12.7%) and Jersey (12.1%) completed the top five.

Knight Frank said the supply constraints alongside the strengthening demand are putting pressure on prices for both Malta and Jersey. Meanwhile, Ireland’s burgeoning economy explains its strong performance. Ireland has been Europe’s fastest-growing economy for four consecutive years, with gross domestic pro- duct growth estimated to have reached 7.8% in 2017.

Despite rising by 12.7% in the year to March, residential prices in Ireland remain 21% below their peak in 1Q07.

As indicated in the Global House Price Index in 4Q17, Europe’s recovery is now well underway, closer analysis confirms 11 of the 15 strongest- performing housing markets globally were in Europe at the end of March 2018.

However, Knight Frank said it is not a uniform picture as Greece (-0.2%), Italy (-0.3%), Norway (-1.1%) and Finland (-1.3%) all sit within the bottom 10 rankings.

Knight Frank international residential research partner Kate Everett-Allen said what is clear is the extent to which the outliers are disappearing with the performance of countries and territories now converging.

“This may be an indication that buyer sentiment is weakening, as the shift towards tighter monetary policy and the removal of stimulus becomes a reality in key global economies,” she added.