This article first appeared in City & Country, The Edge Malaysia Weekly on January 9, 2023 - January 15, 2023
Since the country began its transition to the endemic phase of Covid-19 in April last year, the property industry has shown signs of improvement, as evidenced by better overall sales performance and more landbanking activities.
City & Country talked to local industry experts about their key takeaways from 2022 and insights for the new year. Many of them expect the industry’s recovery to continue, premised on a stable political scene and improvements on the health front. However, issues such as the rising cost of living and a potential global recession were among their concerns.
While the spotlight was on the industrial subsector in 2022, the industry experts expect emerging subsectors such as data centres and workers’ accommodations to shine alongside industrial this year.
Group managing director
CBRE | WTW
In line with the growth of the Malaysian economy by 14.2% year on year (y-o-y) in 3Q2022, improvement in the labour market and the country’s transition to the endemic phase, the overall sales performance of the property industry improved by 12.6% quarter on quarter (q-o-q) and 71.7% y-o-y in terms of volume. Meanwhile, the residential property segment improved by 11.2% q-o-q and 52.5% y-o-y in terms of volume during the same period.
However, new residential launches in 1H2022 decreased by about 37% y-o-y, as of 3Q2022, while newly planned residential supply was lower by 13% y-o-y. But we saw hikes of 73% and 27% y-o-y for cluster houses and low-cost homes respectively.
On the commercial side, new office building completions were observed at mega projects, such as the Affin Bank headquarters in the Tun Razak Exchange (TRX), The Stride at the Bukit Bintang Commercial Centre, and UOB 2 and the Employees Provident Fund headquarters in Kwasa Damansara. Office occupiers were returning while the demand for flexi-work space arrangements remains.
There were some transactions involving retail and hotel buildings last year, mostly for asset enhancement and capital value investment. A new retail supply of about three million sq ft is expected in 2023, paving the way for competition and outstanding strategies to maintain relevance.
Since Malaysians have generally adapted to the new norms of work, more homebuyers are open to moving to the suburbs or outskirts of the city for houses with larger spaces but still have good accessibility in terms of road and rail networks.
To aid the buying process, additional incentives, such as extending the previous rent-to-own scheme, should be implemented to encourage property buying. We believe that if the Home Ownership Campaign (HOC) is further extended, it will benefit buyers by giving them the incentive to own properties and sellers by allowing them to dispose of their properties. With such an initiative, the recovery can be pushed through active market performance and encouragement of the sale of unsold properties.
On the international side, the foreign property ownership application process should be relaxed and have more strategic regulations to attract the interest of foreign investors and buyers. Malaysia My Second Home (MM2H) is a scheme that should be prolonged with firmer guidelines, with a more fruitful outcome if focused on Singapore and the Asian market.
With a new government in place, Malaysia is expected to have an improved outlook with supportive government initiatives amid looming global uncertainties.
CCO & Associates (KL) Sdn Bhd
Generally, the domestic property market recorded an improved performance in 2022 compared with 2021. Most large developers recorded strong sales despite the discontinuation of the HOC. The reopening of borders and economic sectors through the gradual withdrawal of the Covid-19 Standard Operating Procedures (SOPs) has stimulated the overall property market in Malaysia. The performances of the hospitality and retail subsectors also showed a significant improvement in 2022 compared with 2021.
In 2022, the property market benefited from the pent-up demand after the two-year Covid-19 pandemic. In 2023, the domestic property market will face various challenges. The increase in interest rates will have a direct impact on the affordability of prospective buyers to purchase properties while political instability, inflation and geopolitical tensions will affect the overall market sentiment. The Malaysian property market is expected to record a flat or slightly downward performance in 2023.
Due to the competitive property market, prices have corrected to a reasonable level. Developers continue to offer perks to attract buyers amid the increasing construction costs. Now is a good time to buy a property for your own occupation or to upgrade to a new home, especially a landed residential property. When the market improves, landed houses are expected to record a higher price appreciation than high-rise residential properties.
Despite the healthy economic fundamentals, the Malaysian property market has generally remained flat. The high household debts have prevented the property market from improving as debts affect the affordability of households while financial institutions are cautious about approving loans. Radical measures need to be undertaken to address this issue, such as the establishment of Danaharta to clean up bad loans in the banking system during the 1997–98 Asian financial crisis.
Chief operating officer
Henry Butcher Malaysia
The residential market has been recovering from the Covid-19 pandemic, with a slight increase in the volume of transactions and a larger increase in the value of transactions in 2021. The momentum continued into 2022 when the volume and value of transactions went up by more substantial margins in the first half of last year. The demand was mainly for landed as well as high-rise residential properties priced under RM500,000. Prices were generally stable even though developers continued to offer attractive discounts and sales incentives to attract buyers. Developers were more cautious and held back on new launches as they faced thinner margins due to the substantial increase in construction costs.
The retail subsector benefited from the relaxation of Covid-19 SOPs and shoppers returned to malls in large numbers. Occupancy rates, however, continued to soften as the supply of retail space increased and shoppers were more cautious and spent less. The office subsector again faced a looming oversupply situation that eventually led to lower occupancy rates, although rental rates have managed to hold steady. Industrial was again the best-performing subsector.
The residential market will continue to recover in 2023 but the pace of the recovery could slow as external factors play a part in dictating how the local property market will perform. Some economists have predicted that there will be a global recession in 2023 and if that happens, Malaysia will find its economic growth impacted, which will affect the property market.
Nevertheless, now that the 15th general election (GE15) is over and a new government has been formed, the earlier political uncertainties have been removed. If the new government can focus on economic recovery, investor sentiment will improve, which will then benefit the property market. The office and retail markets will continue to see concerns about oversupply while the industrial market should continue to perform well.
As for opportunities, homebuyers should take advantage of the current stamp duty waiver/reduction before the schemes expire. Projects located in the vicinity of new infrastructure projects will be able to enjoy future capital growth when these projects are completed, while mature and popular areas with no or limited land for development will be good candidates for strong capital appreciation as the supply of properties will be controlled.
The property market will be able to enjoy a more sustainable recovery if the new government is stable and able to focus on and implement effective strategies to spur economic growth. If the recovery of the property market falters, the government could take various measures such as reducing compliance costs to enable developers to reduce house prices, boosting sales by holding another HOC with attractive incentives, and coming up with programmes to help first-time home buyers bridge any shortfall between the down payment and the loan they qualify for.
IVPS Real Estate Sdn Bhd (alliance member of Cushman & Wakefield)
The domestic property market in 2022 fared slightly better than the year before, partly due to an improved economy and continued improvement in the purchasing power of Malaysians who did not splurge in 2021. The purchasing sentiment was high in view of the move to the endemic phase for Malaysia and its neighbouring countries.
Both the primary and secondary residential markets witnessed a significant rebound in 1H2022. In the secondary market, where demand was high with limited supply, property prices increased 15% to 25% from 2021. The oversupply of high-rise serviced residences and undersupply of landed residential properties has persisted and will continue into 2023.
The office market has mixed demand, with a strong take-up being seen in decentralised and fringe localities with a stable supply. The Kuala Lumpur central business district will continue to face oversupply in view of the large incoming supply, an additional 2.6 million sq ft in 2023. The demand may soften with rightsizing exercises by corporations and the preference to move out of the CBD if hybrid working continues.
Meanwhile, the retail subsector saw a revival in 2022 with the top prominent malls being repositioned with more brands or a wider tenant mix to spur retail activities.
The industrial subsector continued to be the star in 2022, especially in Penang. The demand for industrial space was especially high in the state at one point, where a few occupiers rushed to lock in the space in view of the limited supply. In Selangor, more large warehouses were announced and launched, with the majority having the same time of completion in 2024 and 2025, when a perceived oversupply may happen in view of the stabilised demand.
Data centres were definitely hot in 2022 and this will continue in 2023 with some notable hyperscalers committing to developments in Greater KL and Johor.
While investors and homebuyers started returning to the market in mid-2022, the buying sentiment seems to have been dampened by the expected global recession, inflationary pressures and a hike in interest rates. The landed residential market will continue to see good demand, especially in good locations. The weak sentiment in the first half of 2023 will be a right time to explore opportunities. For the secondary market, we believe prices in selected prime areas will see a minor adjustment, where the seller will be more reasonable with the asking price.
To expedite the recovery in the property market, there must be confidence in the new government's ability to promote stability and for investor-friendly policies to be clearly defined and promoted.
While there is an oversupply scenario in the high-rise residential, office and retail space in certain states, the local authorities should review thoroughly the overall supply and demand for such products before approvals are granted.
JLL Property Services (M) Sdn Bhd
Last year, two major events in Malaysia had an impact on the property market: the country’s exit from the pandemic phase and GE15 in November. Despite being newly formed, the government has already taken proactive steps to bring about changes to support local businesses and attract new foreign investments.
In response to Malaysia having entered the transition towards endemicity phase in April, the economy showed robust GDP growth of 5% to 14.2% in the first three quarters of 2022 and the projection for the full year is anticipated to be strong at between 6.5% and 7%.
In property transactions, the overall numbers proved a stronger recovery as both volume and value recorded double-digit growth y-o-y in 2022. The first nine months of 2022 saw 293,206 transactions worth RM131.03 billion, an increase of 45.8% and 33.7% y-o-y respectively.
In the Grade A office subsector, even though supply and demand remained unbalanced, the vacancy rate in general was high. In the KL central and KL decentralised sub-markets, the vacancy rate remained high, above the 20% level, while the KL fringe enjoyed a healthy level of about 10% vacancy. Nevertheless, the recovering demand supported the slight rental improvement over the course of the year across all three sub-markets.
The industrial market continued to demonstrate robust growth, driven by e-commerce companies’ expansion and the continuous entry of multinational corporations representing various industrial and logistics-based ventures such as e-commerce, 3PL and manufacturers.
Moving into 2023, we foresee the spotlight remaining on industrial and logistics and extending gradually to the emerging data centre subsector. Though still in its niche phase, the demand for data centres will continue to grow in line with the need for digitalisation.
We also see corporates looking to attract the best talents and seeking options to improve their properties to meet high standards of sustainability. Financial institutions specifically have requirements imposed by Bank Negara Malaysia to follow the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Therefore, ESG (environmental, social and governance) will remain a top priority on the agenda of real estate owners and investors in the coming years.
Group managing director
Knight Frank Malaysia
A quick look at the National Property Information Centre’s (Napic) nationwide data shows that the property market performed well in the first nine months of 2022. In fact, it already achieved 98% of 2021’s property sales volume and 90% of 2021’s transaction values during that time period, setting up 2022 to be a definitely better year for property transactions than 2021.
Y-o-y, for the three major subsectors — residential, commercial and industrial — the total volume of transactions rose 37.1% while values increased by 30.6%. The residential subsector recorded 181,167 transactions worth RM70.65 billion during the period in review, an increase of 34.6% in volume and 35% in value y-o-y. The commercial property segment recorded 23,738 transactions worth RM21.86 billion, up 54.2% in volume and 15.7% in value y-o-y. The industrial subsector recorded 6,044 transactions worth RM15.24 billion, an increase of 57.4% in volume and 35.5% in value.
On the commercial side, the performance of malls remained moderate, with overall occupancy rates in Greater KL continuing to trend downward against a backdrop of growing retail space.
Office market performance improved slightly, with positive movements in prime locations, particularly in the centres and fringe areas of KL and Petaling Jaya. Rents in KL city centre remained relatively constant while those in the KL fringe areas and Selangor showed a slight increase.
The industrial subsector continues to be supported by stable demand for well-located warehouses and consistent demand for logistics facilities to serve the expanding e-commerce and logistics subsector. Nevertheless, rising transport costs, labour shortages and supply chain disruptions remain a concern.
We expect a gradual improvement in the real estate market in 2023, with rising inflation and the overnight policy rate (OPR) expected to have an impact on the appetite of real estate buyers in the immediate term. Bank Negara’s projection of economic growth between 5.3% and 6.3% in 2022 is also likely to have a positive impact on the development of the real estate market in the coming years.
To expedite recovery in the property market, the supply and demand imbalance can be reduced by understanding actual demand and building according to the current buyers’ needs. Other than that, the authorities can introduce relevant government initiatives granting relief and monetary incentives, easing of interest rates and credit policies, among others. The government should also outline clear policies for bringing economic investments into our country and encouraging all direct measures to revitalise and sustain the growth of the property industry.
KGV International Property Consultants (Johor) Sdn Bhd
We saw improvements in the domestic property market in 2022 compared with the last two years, which were severely affected by the pandemic. There was an increase in the total transaction volume and value. There was also a marginal increase in the All-House Price Index, especially for landed residential. 2022 was a year that witnessed many landbanking activities as developers prepared themselves for a future recovery.
Some developers expect the landed residential market to fare well and selected high-rise properties to sell well too, especially in high-density areas. All of them expect a compression of profit margins due to the increase in labour and building costs. Increased land and compliance costs are not helpful in this respect. However, there will be pent-up demand from first-time homebuyers after two to three years of waiting.
There will be plenty of opportunities for investors, especially in the high-rise segment, as developers are clearing their inventories. Freebies and incentives will be given to entice buyers. Houses priced below RM700,000 will be plentiful for homebuyers as these are within the affordability of many. However, the challenge is to obtain bank loans.
GE15 has settled the political uncertainties of the past which brings much relief to investors. However, global inflation and a possible recession still hang over their heads. The government must continue to engage with stakeholders to ensure a healthy property market.
Some of the measures that can be taken include the exemption of stamp duty for first-time homebuyers for properties within a specific price range. The Real Property Gain Tax (RPGT) after five years must be abolished except for non-citizens. The MM2H programme needs further fine-tuning to attract the right target groups to the country.
Laurelcap Sdn Bhd
The domestic property market was performing well in 1H2022 and sentiments were positive. About 188,000 transactions worth RM84.4 billion were recorded during the period, up 30% y-o-y.
The residential market recorded the highest y-o-y increase of 116,178 transactions and RM45.62 billion in value in 1H2022, an increase of 26.3% and 32.2% y-o-y respectively.
Meanwhile, the commercial subsector (including serviced apartments and SoHos) performed better in 1H2022, recording about 15,169 transactions worth RM14.02 billion, an increase of 45.4% and 28.3% respectively from 2021. Nevertheless, the demand for office and retail space was still sluggish as the oversupply situation from the pre-pandemic period still lingers.
The industrial subsector performed well. There was a spillover from the rise in online shopping due to the pandemic, during which the demand for warehousing and logistics space bloomed in tandem. In addition, the rise in demand for data centres was felt in 2022.
However, new property launches slowed at the end of the year due to the rise in construction costs and political uncertainties gripping the country. In addition, the unforeseen Russia-Ukraine war resulted in an outsized impact on the global supply chain, impeding the flow of goods, fuelling dramatic cost increases and product shortages, and creating food shortages around the world, resulting in high inflation globally.
Bank Negara, along with other central banks, increased its OPR marginally but at many intervals. This helped cushion the impact on the property industry.
Moving into 2023, I believe there are still a lot of market uncertainties and the property market in 1Q2023 will be subdued. However, I foresee the demand for industrial properties in Malaysia remaining strong. The same goes for the residential segment. Developers are expected to continue dishing out goodies for homebuyers, especially first-time purchasers, who get to enjoy a stamp duty exemption on their properties.
For the hospitality subsector, the pent-up demand is still strong and most likely will spill over into 2023 as China is slowly loosening its Covid-19 restrictions for travellers. However, the office and retail subsectors will still face challenges in 2023.
In my opinion, to expedite the recovery in the property market, the government should really look into revamping the MM2H programme to mop up the unsold stock. With the weak ringgit expected to continue in 2023, it is a great opportunity for developers to reduce their unsold stock.
Metro Homes Realty Bhd
The domestic property market was still sluggish in 2022. The best performers were the affordable residential and industrial subsectors, whereas the other subsectors were still moving slowly.
We foresee a tipping point in the property market this year, backed by the formation of a new government that focuses on diversity and multiculturalism. We hope the government will come out with the right policy that can boost home ownership and encourage foreign buyers to purchase high-end residential properties to clear unsold inventories. Malaysia’s property market is attractive in the region for its quality and affordable prices.
For individual property buyers, there are plenty of good completed unsold units in the market, which come with good buying packages, rebates and discounts, as most of the developers are still focusing on clearing existing stock.
For investors, now is a good time to explore investment opportunities in promising locations, such as hotel investments near the Johor Baru-Singapore Rapid Transit System (RTS) station in JB or industrial project investments near the Express Rail Link (ERL) station.
The property industry also needs more catalysts and bold measures, such as a 100% stamp duty waiver for residential properties and a 100% loan margin. We also need to increase our average income level by getting more foreign direct investments (FDIs), as well as give more support or grants to local entrepreneurs to help them grow their businesses in the international arena.
To expedite the recovery of the property market, we need to revamp the policy to have better control over the housing supply. Meanwhile, we should also consider the “build and sell” model to cut down on existing overhang units and reduce the number of abandoned projects.
Nawawi Tie Leung Real Estate Consultants Sdn Bhd
The volume of transactions declined in 1Q2022 following the discontinuation of the HOC that ended in 2021. Sales started to pick up again in 2Q2022 and gained momentum in 3Q2022.
The total number of residential transactions in 9M2022 enjoyed an increase of about 34.6% y-o-y while the total value of transactions for the same period saw a rise of 35.1% y-o-y. This means the overall prices of property transactions increased, although slightly, reflecting a nascent recovery in the market. The total value of transactions exceeded the transaction value achieved in 2019 by 34%.
We are cautiously optimistic that the market will continue to strengthen in 2023, along with the recovery of the economy and an improving job market. However, there are multiple headwinds, among which are higher interest rates, the rising cost of living, construction cost inflation, continued labour shortages and the looming global recession risk.
Property is a good hedge against inflation and this is an excellent time to buy real estate. There are also many incentives and freebies currently being offered by developers to clear their unsold inventories.
Properties with good access to amenities that are well connected and located in great neighbourhoods and, if possible, close to a mass rapid transit (MRT) or light rail transit (LRT) station are always a good choice. Prices are very attractive in today’s price-sensitive market, but they are not expected to remain at these levels as construction costs have gone up and it is only a matter of time before property prices follow suit.
There is a stamp duty waiver for first-time homebuyers on properties priced at RM500,000 and below until December 2025, which encourages those considering buying a property to make that all-important decision.
However, some homebuyers need additional assistance if they are currently renting, as they have to pay their existing rent on top of their housing loan instalment while waiting for their property to be constructed. This is where the developer interest-bearing scheme (DIBS) can be useful. It will be good if the government can consider reimplementing this scheme for first-time homebuyers.
PA International Property Consultants (KL) Sdn Bhd
Overall, there was an improvement in property market activities in 2022, with signs of normalising economic activity as the country moves towards endemicity. However, the domestic property market was sluggish in October and November, mainly due to GE15. The uncertainties pre- and post-election prompted buyers and investors to adopt a wait-and-see attitude.
As for the primary market, developers held back on launching new projects in 3Q2022. Most of them either focused on completing their ongoing projects or adopted pre-launch strategies to test market sentiment and gain interest among potential buyers before the official launch of the properties.
With a new administration, the outlook for the property market remains cautious in 1H2023 as the policy effects may take a while to be seen as the new government settles in. Furthermore, the growth momentum may slow on the back of interest rate hikes, rising domestic and global inflationary pressures and ongoing geopolitical tensions.
However, on the upside, market sentiment appears to have improved since the formation of Malaysia’s new unity government, as evidenced by the rising stock market and strengthening ringgit to under 4.50 against the US dollar. We hope to see new economic policies that may entice both FDIs and local investments to enhance economic activities, which in turn will encourage property market activities, especially in new and more dynamic developments.
Moreover, the exemption of 75% stamp duty on sale and purchase agreements of properties priced between RM500,001 and RM1 million is expected to stimulate transaction activities, especially in the secondary market, if the policy continues to be listed in Budget 2023 which will be tabled early this year.
Moving forward, investors should continue to look for properties in the secondary market, particularly those that are tenanted. With the emergence of e-commerce and continued foreign interest in industrial properties that support logistics and warehousing, this subsector is worth a look as well.
As for homebuyers, this is a good time to buy as the soft market has forced developers to offer attractive rebates and packages as well as easy payment financing schemes, such as HouzKEY and FundMYHome. Residential properties that are strategically located and easily accessible, particularly by LRT or MRT, will see price increases in the medium to long term.
Tax exemptions and liberalised housing policies to encourage foreigners to take up the overhang in the market and relaxed lending guidelines could lead to a general recovery of the property market.
PPC International Sdn Bhd
The growth of capital value across all subsectors from 1Q2022 to 3Q2022 was stronger than the same period in the last three years, even higher than pre-pandemic levels. The impressive performance in 9M2022 was attributed to the transactions in the residential property subsector, followed by agriculture. To a large extent, it can be said that even though we are going through an endemic stage, 2022 performed better than expected.
Generally, high-yielding properties will continue to attract attention and we expect the industrial subsector to continue delivering high returns compared with other subsectors. The repercussions of the pandemic have resulted in logistics and industrial being relatively the strongest subsector, benefiting both occupiers and investor markets. We are of the opinion that with markets opening up globally, logistics and industrial will experience an expansion and upgrading of space as a result of the rise in e-commerce.
In addition to industrial and logistics, subsectors such as tourism, data centres, medical, healthcare facilities and even retirement villages are expected to see growth.
In 2023, we expect the market to continue growing moderately given that the newly elected government will instil some confidence in the market. However, the market is not expected to be very bullish against the backdrop of global headwinds.
Nonetheless, Malaysia has a young demographic structure, comprising mainly millennials under the age of 40, who are generally home seekers. This will augur well in terms of demand for housing. With rising building costs and the cost of living, house prices in the primary market are not expected to decline. To keep prices low, developers are building units with smaller built-ups and increased density for viability reasons.
To boost a further recovery of the property market, we propose that the government reintroduce the HOC for both the primary and secondary markets this time and provide a reduction in RPGT. In addition, for first-time residential property purchasers aged 30 and below, the tenure of housing loans should be increased from 30 to 35 years.
Raine & Horne International Zaki + Partners Sdn Bhd
In a nutshell, the landed residential property market did very well in 2022 despite having slowed down in 3Q2022 due to some internal and external headwinds. It is worth noting that the vacancy rate in high-rise residential properties was on the rise based on a mismatch of supply and demand, rising interest rates and other uncertainties such as the Russia-Ukraine War.
On the other hand, occupancy rates in the office and retail subsectors moved downward and came under some pressure. However, these have recovered a little from 2021 as economic sectors were reopened this year and more people were willing to spend. Shopping is indeed a favourite activity of many Malaysians.
Meanwhile, the industrial subsector was the brightest spot in the market with many developers launching industrial projects. Prices were driven by e-commerce and demand for logistics.
Moving forward, we believe the demand for landed residential properties will continue to be strong while the overall property market will remain stable, except for high-rise residential, which will see a huge influx of supply in the next few years. Nonetheless, it will be a good time to buy properties, especially landed properties with good facilities, amenities and accessibility.
To expedite the recovery in the property market and to reduce the overhang units, we suggest loosening the restrictions for foreigners to own property, as well as reviewing the strict MM2H criteria, as it will be helpful to encourage foreign buyers to come to Malaysia.
From the developer’s perspective, the government should reduce compliance costs and statutory contributions to help developers lower the overall construction cost, which in turn will help keep house prices within the reach of the masses.
Director of research
Rahim & Co International Sdn Bhd
The property market improved in 2022 with a significant increase in the number of transactions. This was partially due to the low base effect, with an increase of more than 45% in volume and 22% in value in 9M2022.
In the first half of 2022, the majority of the states had reached pre-Covid transaction levels similar to that of the first half of 2019. This is by no means an indication of a full market recovery but hopefully, a resumption of the rebound that started in 2018/19 that was severely interrupted in 2020/21.
Of the overall transactions recorded, more than 60% were from the residential subsector. But house prices in general have shown signs of a correction. Notwithstanding the marginal decline in prices, those in established residential locations still held up, with some recording increases fuelled by locally driven demand.
Looking ahead, the momentum generated in 2022 is expected to moderate in 2023. The property industry is expected to grow gradually amid the still-challenging environment and uncertainties due to the new domestic political landscape post-GE15, as well as the global geopolitical situation, inflationary pressures, rising construction costs and a weakened ringgit.
Additionally, there are concerns about affordability, the cost of living, interest rate hikes, the impact of the Russia-Ukraine war and the China factor. The approach taken by the new unity government to strengthen political stability in the country and promote further accommodative policies and public infrastructure investments is key to improving consumer and investor confidence as well as economic and employment-market sentiment, which drive purchasing decisions.
Nevertheless, we expect interest in the property market to continue, despite the oversupply and overhang levels that still undermine the market. Gradual growth of the market is expected with more innovative and niche market products, although rising construction costs could lead to higher prices and compressed development margins. Also, building owners may continue enhancing and repositioning their assets within the office and retail mall subsectors.
It is still a buyer’s market, but many are pressuring buyers with the notion that interest rates are rising and that they should “buy now before it gets too expensive”. Before making any purchasing decisions, buyers must be well informed, not only about the project and the developer but also about their own priorities and financial capacities.
Moving forward, we hope for continued support from the government and financial institutions for the industry, on top of creating new higher-income job opportunities for the rakyat.
Government policies should be for the market at large, and programmes like i-Miliki and incentivised purchases should be expanded to the secondary market and not just for the primary market. We hope that the government will continue to maintain its focus on first-time homebuyers and improve affordability for them.
Cost-push price increases due to rising material and labour costs should also be addressed through intensive technology-based solutions. Innovation, IBS and 3D printing that have previously been promoted need more concerted programmes and incentives for better adoption by industry players to reduce the overall cost of construction.
Group managing director
2022 was eventful as we saw vast improvements in many business sectors, and the reopening of borders on April 1 helped businesses and markets across the board.
However, many factors emerged over the course of the year, ranging from the Russia-Ukraine War that is still ongoing to the increase in the OPR at 25 basis points (bps) per quarter, a hike in construction costs (about 22% to 25%), high inflationary pressures and local politics, which have taken a toll on markets, including the domestic property industry. All things being equal, 2022 was supposed to be better.
As such, we saw that high-value capital transactions remained muted amid limited investor appetite and ongoing volatility in the markets which directly affected dealmaking.
In terms of the residential subsector, the number of transactions and loan applications gradually improved last year, indicating strong demand for good properties. However, the overall supply has steadily increased over the years and widened the demand-supply gap, which results in high competition.
For 2023, we think the path towards full recovery remains ambiguous. Many markets are still in recessionary mode and are licking their wounds from the Covid-19 impact. There was also the shock in oil and gas prices, worldwide high inflationary pressures and increases in raw material and construction costs, not to mention the upcoming retabling of Budget 2023.
We foresee that the uncertainties will continue in 2023, especially with the high cost-push seen in the property industry which indirectly drives up the production costs of properties. Bank Negara has consistently revised the OPR upward by 25bps each in the last four quarters and economists project it to reach pre-Covid levels of 3.25% to 3.5% by 1H2023, which reduces homebuyers’ actual borrowing capacity.
In terms of opportunities, property prices are still relatively attractive and there are many bargains on the table. With the cost-push in construction costs and increase in land values, new properties will get pricier and we see prices eventually moving northward. The market will continue to move but at a slower pace to achieve equilibrium.
To expedite the property market’s recovery, the government must be committed to pushing the property market northwards to allow for a bull run, as the local property market is still strongly driven by government policies via our national budget.
As the property market was not well prioritised and the main focus was on assisting the B40 group and first-time homebuyers in the last few years, we hope to get a blanket increase across the entire market to lift the lacklustre demand and property prices.
Some major property policies are needed, namely a full exemption of RPGT for all subsectors for a fixed period, full stamp duty waivers, a reintroduction of the controlled DIBS to ease financing options with full loan support backed by Bank Negara and the banks, allowing foreign ownership with nominal restriction for a lasting period, normalising the MM2H programme, centralising control in future supply and adopting effective policies to clear overhang units.
VPC Alliance (Malaysia) Sdn Bhd
Despite the reopening of the economy in April 2022, the domestic property market remains sluggish. Apart from the huge residential overhang (34,092 units worth RM21.73 billion in 1H2022), our economy was affected by domestic headwinds.
In 2022, many developers held back their property launches and concentrated on launching affordable housing. Based on Napic data, 10,552 residential units were launched in 1H2022 and only 2,141 units, or 20%, were sold. This poor demand clearly illustrates the pathetic situation in our domestic property market. International headwinds include the Russia-Ukraine war, which disrupted the global supply chain and energy supply, and the neverending US-China trade war.
Other challenges were overbuilding in many property subsectors and higher home lending costs, where even more potential home buyers were not eligible for housing loans.
The property market is not expected to fully recover to pre-pandemic levels in 2023, given the scenario of a possible global recession. How the property market performs this year will depend on the economic recovery, which is the main priority of Prime Minister Datuk Seri Anwar Ibrahim’s unity government, apart from promoting national unity.
Despite the sluggish property market, there are opportunities to invest in senior living suites with wellness centres and assisted living facilities as well as units in retirement villages, which a few developers are developing now. Also, investments in student housing will provide a ready market as will investments to develop industrial units to cater to small and medium enterprises.
To expedite the recovery in the property market, I recommend that the government get banks to provide a revolving fund to purchase unsold residential units and rent it to deserving first-time home occupiers, especially those from the B40 group. Second, as the silver economy is underdeveloped, the government should provide developers with incentives to develop assisted living senior housing.
In line with the ESG agenda, we would like to see more initiatives encouraging developers to build smarter and more environmentally friendly homes. We also hope to see a revival of the HOC and an extension of the coverage to the secondary market, to encourage foreigners to buy and invest in properties in Malaysia, and a relaxation of the strict guidelines of the MM2H programme to attract more foreigners to reside here.
Managing director and CEO
The domestic property market has shown signs of recovery following the pandemic and the country’s transition to the endemic phase, with improved performance across the board. It was underpinned by robust economic growth, strong inflows of FDI and continued policy support.
The residential and industrial subsectors continue to lead the property market with first-time homebuyers and the global e-commerce boom driving demand. This has accelerated landbanking activities in both subsectors as developers seek to increase their land bank in established and emerging growth areas to support future growth.
Retail and office subsectors remain challenging, especially in Greater KL, due to the oversupply environment and new completions in the next couple of years. Nevertheless, major retail malls are recording improved performance with footfall returning to pre-Covid levels and retail sales increasing, while the demand for high-quality office buildings with ESG compliance is growing as companies opt to increase efficiency by transitioning to newer buildings with flexible layout options.
In 2023, we expect the property market to continue to stabilise with a generally improved outlook for the economy and better prospects for investment inflows with the formation of a stable government, although amid rising inflationary pressures.
The growth of the property market will be fuelled primarily by the industrial and residential subsectors as well as emerging subsectors such as warehouses/distribution hubs, data centres, healthcare/wellness facilities and workers’ accommodations.
In the residential subsector, we foresee developers being cautiously optimistic in the medium to long term, owing to strong demand for residences, particularly among first-time homebuyers. Landbanking will remain active as developers seek to increase their offerings to cater to the affordable market segment. The rental market will see strong growth as an increasing number of property seekers gravitate toward renting due to the higher cost of living.
Commercial subsector stakeholders (office, retail and hotel) will continue strategising and innovating to enhance their product offerings to adapt to shifting market trends and navigate the challenging landscape.
Moving forward, there will be a greater emphasis on implementing ESG initiatives and incorporating technology to accelerate the adoption of digitalisation across all property sectors.
In terms of opportunities, investors can look at emerging subsectors such as build-to-suit warehouses/distribution hubs in strategic locations with excellent connectivity, data centres, healthcare/wellness facilities, education facilities, workers’ accommodations, students’ accommodations, and retirement and co-living accommodations.
For homebuyers, they can look at high-rise residential properties in established and emerging urban areas near MRT/LRT stations and retail offerings, as well as rightly positioned residential products in township developments by established developers, particularly in city fringe locations and close to MRT/LRT stations.
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