Property market outlook positive after 7.93% growth in demand index

KUALA LUMPUR – Malaysia’s property market exhibited an anticipated trend of gradual improvements, noting an overall increase of 7.93% quarter-on-quarter (Q-o-Q) in the demand index, a recovery from the contraction seen in the previous quarter.

According to a statement by PropertyGuru Malaysia, its recent Malaysia Property Market Report Q3 2022, powered by PropertyGuru DataSense, showed upward trends in several notable areas, namely the property sale market index, demand index, and supply index across the landed and high-rise sectors.

It said that these slight improvements can be attributed to the country’s transition towards the endemic stage, allowing for the reopening of borders and increased productivity, leading to better consumer confidence.

PropertyGuru.com.my and iProperty.com.my Country Manager for Malaysia, Sheldon Fernandez, said “As expected, the property market in the second quarter of the year saw a gradual trend of improvements, although it may not be fully out of the woods yet. Several ongoing factors such as the rising inflation, increase in the Overnight Policy Rate and affordability issues weigh in on the market conditions. While we have seen more activity in the last quarter, it will take some time before consumers are more confident in making large property decisions. The full impact of these factors will most likely be seen in the current quarter’s performance.”

Rental demand continues to increase amid rising inflation

The statement noted that with the rising inflation of 3.4% as of June 2022 and the Overnight Policy Rate increase to 2.25% earlier this year, potential home-buyers may still be cautious in making large purchasing decisions.

“This trend was also captured in the Malaysia Property Market Report Q3 2022, as rental demand continued on an upward trend, registering a 12.89% Q-o-Q growth and a massive 96.83% year-on-year (Y-o-Y) rise in Q2 2022. With the ongoing inflation and worries of rising purchasing costs taking effect, potential home-buyers will gravitate towards rental as a short-term alternative, and the rental market will likely continue to expand to the year’s second half,” it explained.

Meanwhile, the rental price index saw an increase of 2.82% Q-o-Q and 4.46% Y-o-Y in Q2 2022.

The statement also said that the slow but steady growth of asking rental prices is also causing a growth in the supply of rental properties, with landlords taking the opportunity to leverage on rising demand trend and enthusiastically listing properties.

Various Factors Contributing to Ongoing Property Market Recovery

The trends in the Malaysia Property Market Report Q3 2022, also demonstrated the landed sale price index increasing by 1.32% Q-o-Q and 5% Y-o-Y in Q2 2022.

Additionally, it said that there was also an uptick of 1.91% Q-o-Q and 7.31% Y-o-Y in supply, indicating a slight increase in confidence for both buyers and sellers at this point.

“This is consistent with the latest market report published by the Valuation and Property Services Department in April 2022, highlighting that the overall volume of property transactions increased by a marginal 1.5%.

“This comes on the back of transaction values rising by a significant 21.7%. The report also shared that the residential sub-sector is the largest contributor accounting for 66.2% of transaction volume and 53.1% of the transaction value,” the report added.

Furthermore, other factors that attribute to the gradual improvements seen over the last quarter, such as the reopening of borders, has brought back the prospect of the market’s expansion that appeals to foreign buyers.

According to data from the Malaysian Development Investment Authority (MIDA), when exchange rates were favourable, Singaporeans had been listed as the top three foreign direct investors in the property market in 2017.

“Following that, Johor has also become a focus area based on findings in the report, seeing substantial demand for properties in the Kulai area, a township with a growing modern industrial presence and rapid urban revolution,” the statement said.

Among the key reasons contributing to the substantial increase in demand of 32.60% Q-o-Q and 43.17% Y-o-Y is its position within the Iskandar Economic Zone. The growth can be attributed to the availability of transportation, information technology, high-tech industry, education, business and property for companies and industries to establish themselves there.

“Based on our observations with the recent Malaysia Property Market Report, we can see that current conditions are now more favourable than market conditions during the pandemic. While these gradual improvements are noted, many potential homebuyers are still on the fence about making purchasing decisions. Overall, we hope to see market conditions continue to make moderate gains in the coming quarter,” Fernandez concluded.

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