Price correction will be good for the market in the long term
By FARA AISYAH / Pic By MUHD AMIN NAHARUL
Residential owners across Malaysia are losing pricing power due to an ample supply of homes and the cancellation of major infrastructure projects, including in the key property epicentres of Kuala Lumpur (KL), Selangor, Johor and Penang.
The PropertyGuru Market Index (PMI) for the third quarter of 2018 (3Q18) showed asking prices by real estate developers and individual owners nationwide had fallen by 1.8% quarter-on-quarter (QoQ), while prices fell 2.5% on a year-on-year (YoY) basis.
The bearish report — derived from PropertyGuru’s extensive proprietary data — noted certain market segments and locations are under increased pressure with sellers prepared to discount prices to secure buyers amid the oversupply of homes.
In a statement yesterday, PropertyGuru Malaysia country manager Sheldon Fernandez said owners may be opting to sell as rental rates are under pressure due to the ample choice available in key areas.
“With more supply, one can drop rental rates, but if that is not feasible, the usual option is to sell to unlock the gains.”
The downtrend in house prices could also be due to a fall in overall value provided to reduce ownership cost.
“Developers throwing in freebies such as furnishing and décor, carparks or even rebates reduces the overall cost of ownership and have a knockdown effect on prices,” Fernandez added.
KL saw the largest price drop of 3.2% QoQ, followed by Johor at 3.3%, Selangor 1.8% and Penang at 1.3%.
According to the PMI, the residential market in Johor experienced capital appreciation from 4Q16 to 2Q18, but registered a dip of 2.3% YoY in 3Q18.
Selangor recorded the highest yearly fall at 2.4%, followed by Johor at 2.3%, Penang 0.7% and KL at 0.5%.
With the exception of Johor, all markets continued to show a discount to their 2015 base prices.
Fernandez said 2018 remains largely a buyers’ market, but certain locations could rebound with the completion of the Mass Rapid Transit Line 2, Light Rail Transit 3 or other infrastructure projects.
“While the sentiment towards the property market has improved considerably, it appears asking prices have yet to catch up. The price correction will be good for the market in the long term.”