KUALA LUMPUR, 5 December 2019 – Southeast Asia’s leading property technology company, PropertyGuru Malaysia has a neutral outlook for property prospects in 2020, with glimmers of opportunity amid a trying market.
“With a GDP of RM1.45 trillion in 2018, we’re not too far off the mark. It’s undeniable that Malaysia has come a long way since the 1990s, and with Budget 2020’s focus on digital transformation, it looks like we’ll go even further,”
“The Securities Commission has already registered the country’s first property crowdfunding platform, and other innovations are finding their way into the industry, increasing its diversity and resilience,” said Sheldon Fernandez, Country Manager of PropertyGuru Malaysia.
However, the ongoing issues facing domestic property such as affordability, supply-demand imbalances in the market and loan financing remain key challenges.
With regard to loan financing, for example, Bank Negara Malaysia (BNM) has seen an uptick in defaults from 2018 through 2019, particularly among those with variable income and those with properties worth more than RM500,000.
“These issues are not limited to the Malaysian property market, and are a product of increasing population pressure and decreasing land availability in urban hotspots. As more purchasers compete for fewer properties, prices are driven up, with developers catering to segments with higher profit margins,” says Fernandez.
In Malaysia, these trends are underscored by perceptions of income stagnation and rising costs of living. The Department of Statistics Malaysia’s (DOSM’s) most recent Household Income and Basic Amenities Survey reported the median monthly income in the country as RM5,228 in 2016, growing at a rate of 6.6% per annum.
The Consumer Price Index (CPI), meanwhile, has grown at an average of 2.5% year-on-year (YoY), with an increase of 1.1% YoY in October. The disconnect between real and perceived inflation is explained by BNM as a function of frequency and memory bias.
Regardless, with the benchmark for affordability set by US-based consultancy Demographia International as three times the annual household income, this means that the price ceiling for affordable housing was about RM188,208 in 2016.
Today, this figure has been reported at RM282,000, while the average price for newly launched houses was RM417,262.
According to the PropertyGuru Market Index (PMI) Q3 2019, asking prices for properties across the board declined in three out of four major markets in Malaysia, namely Kuala Lumpur, Selangor and Penang.
Overall, prices in Malaysia declined 0.9% YoY in the third quarter, with Penang leading the contraction with a 1.5% quarter-on-quarter (QoQ) decrease in its PMI from 94.8 to 93.4 in Q3 2019.
Johor was the only domestic market which exhibited no decrease in its index; however, it also failed to showcase growth, with a static PMI of 98.5 in the third quarter.
Industry analysts attribute falling prices to adjustments on the part of developers to clear unsold stock and ease cash flow, along with downward pressure from the HOC. Buyers with sufficient leverage can take advantage of the current market to expand their portfolios.
PropertyGuru stated that the Ringgit’s volatility, along with sociopolitical uncertainty as the euphoria of Malaysia’s 14th general election fades against a backdrop of increasing dissatisfaction, would have a negative impact on investor appetites – with the exception of Johor, which has seen optimal investment numbers to date.
“Moving forward, we anticipate proptech and fintech to play larger roles as international trends find their way to local shores and industry stakeholders seek to differentiate themselves in a heated market,’” says Fernandez.
On the side note, Jones Lang Wootton Executive Director, Prem Kumar said the influx of Hong Kong property buyers were seen taking place a few months ago.
Echoing Prem’s view, CCO & Associates (KL) Sdn Bhd executive director Chan Wai Seen said the properties purchased by the Hong Kong citizens were priced over RM1 million per unit at good locations.
“But how long it (the purchase) will continue, depends on the situation in Hong Kong,” he said, adding, local property projects such as one in Genting Highlands would continue to draw mainland Chinese buyers in the coming years.
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