This article first appeared in City & Country, The Edge Malaysia Weekly on August 14, 2023 - August 20, 2023

Buyers have become cautious about making property purchase decisions after experiencing a series of 25-basis-point increments in the overnight policy rate throughout 2022, Savills Malaysia associate director of research and consultancy Fong Kean Hwa observes, adding that the decline in property transaction activities in the first quarter can be attributed to this cautious sentiment.

“Essentially, the drop in the Consumer Sentiment Index (by 6.1 points to 99.2) in 1Q2023 further indicates consumers’ cautious spending. Additionally, the slower seasonal purchase during the first quarter further contributed to this scenario,” he says in presenting the The Edge | Savills Klang Valley Residential Property Monitor for 1Q2023.

During the period under review, Kuala Lumpur recorded 2,863 residential property transactions worth RM2.34 billion, representing a year-on-year (y-o-y) decline of 8.4% in volume (1Q2022: 3,127 transactions) and 30.1% in value (1Q2022: RM3.35 billion).

Similarly, Selangor recorded 12,397 residential property transactions worth RM6.53 billion, declining 9.9% in volume (1Q2022: 13,758 transactions) and 12.8% in value (1Q2022: RM7.49 billion) y-o-y.

At the same time, the Klang Valley also witnessed a lower supply. KL recorded 2,755 new completions in 1Q2023 — a significant drop from 10,814 units recorded in 1Q2022. In Selangor, 3,826 new completions were recorded in 1Q2023, compared with 4,511 units in 1Q2022.

Therefore, Fong anticipates property developers will be more careful when launching new products and readjust the selling prices for their planned and upcoming projects as construction costs are forecast to rise, on top of the labour issues that developers have been facing.

In terms of market catalysts, he notes that major infrastructure developments — including the fully operational MRT Putrajaya Line (MRT2), the Sungai ­Besi-Ulu Kelang Elevated Expressway (SUKE) Phase 2 and the ongoing Setiawangsa-Pantai Expressway (SPE) — will benefit neighbourhoods in the vicinity. “This is likely to further stimulate demand for residential properties nearby.”

Moreover, the Real Property Gains Tax (RGPT) exemption for the disposal of property after five years from the acquisition date, as well as full stamp duty exemption for first-time homebuyers on the first RM500,000 in property value and 75% on the subsequent value between RM500,001 and RM1 million announced under Budget 2023, will spur residential market activity for the remainder of 2023, says Fong.

“In addition, Selangor’s state budget worth RM2.45 billion that focuses on empowering the state’s economic activities will likely generate more employment opportunities, driving population inflow to the state. This, in turn, is a positive sign for the residential property market.”

Nonetheless, while Fong anticipates the property market will remain challenging in 2023, he is “cautiously optimistic”.

For the purpose of this quarterly monitor, Savills Malaysia has brought back landed residential samples into its analysis.

“For the 2-storey terraced house segment,we have selected 13 residential neighbourhoods in KL, PJ, Subang, Puchong, Shah Alam and Klang, and for the 2-storey semi-detached segment, we have selected nine in PJ, Puchong, Shah Alam, Klang, Cyberjaya, Seri Kembangan and Semenyih, based on the most active transacted unit sizes at the respective locations,” Fong explains.

For the terraced houses, the samples range from 1,300 to 1,900 sq ft, whereas the semidees will range from 3,000 to 3,600 sq ft.

“For the analysis, all units sampled are intermediate lots, excluding bumiputera quota and bumiputera discounted units. The prices reported are the average price per unit based on the transacted data after adjustments for size, condition, specific location, interest and improvements. Meanwhile, the rental reported is the monthly rental recorded for similar properties.”

As for the high-rise residential property monitor, Savills Malaysia selects from a total of 56 projects in the KL city centre, Bangsar, Mont’Kiara, Bandar Sunway, Subang Jaya and Shah Alam.

“We look at 2-bedroom units (measuring 580 to 1,600 sq ft) for areas in KL and 3-bedroom units (900 to 2,100 sq ft) for areas in Selangor.”

During the review quarter, KL’s high-rise residential segment saw mixed performance in the average transacted prices, while rents remained relatively stable.

In KL city centre, the average transacted price of the high-rise properties sampled went up by 1.33% quarter-on-quarter (q-o-q) but dropped by 3.2% y-o-y.

“Average rent remained at RM4,000 per month, which limits the growth in gross yield, which stood at 3.3% and recorded a marginal drop of 0.1%, compared to 4Q2022,” notes Fong. “The impact of the Covid-19 pandemic, coupled with the reintroduction of the MM2H (Malaysia My Second Home) programme with stringent regulations on Aug 1, 2021, can be observed from the [more subdued] performance of both the transacted price and rent in KL city centre, where foreign investors are an important segment in supporting the residential property market, especially the upscale high-rise residential property.”

He adds: “While RPGT and stamp duty exemptions will likely benefit local buyers, the government will re-examine its policies for attracting foreign investors. The announcement of Tun Razak Exchange as a global financial hub will probably be a positive catalyst for the residential property market. Nevertheless, details of the implementation are yet to be made known. The call for revisiting MM2H regulations and introducing the PVIP (Premium Visa Programme) is necessary to draw the interest of foreign investors and migrants.”

In Bangsar, the average transacted price of high-rise properties sampled declined during the quarter to RM941,000 from RM968,000 in 4Q2022. The monthly rental remained stable at RM3,000, resulting in a better gross yield of 3.8% in 1Q2023 compared to 4Q2022, notes Fong.

In Mont’Kiara, both the average transacted price and rent have gone up. This has sustained the gross yield at 4.6%.

“When comparing the price and rental movements in KL to 4Q2019, KLCC and Bangsar have yet to fully recover to pre-pandemic levels whereas Mont’Kiara saw strong recovery, surpassing the pre-pandemic level,” Fong remarks.

For Selangor’s high-rise residential property segment, the ­average transacted prices and rents were relatively stable during the review period.

With an average transacted price of RM861,000, Bandar Sunway’s relatively high average rental (of RM3,400 monthly) compared to other areas has contributed to a gross yield of 4.7%, says Fong. He notes that the township has the highest gross yield across the properties sampled.

The average transacted price of the high-rise properties sampled in Petaling Jaya is close to that of KL at RM1.046 million, notes Fong.

“With an average rent of RM3,400, the relatively higher capital value of the high-rise properties [in PJ] has resulted in a constrained gross yield of 3.9%, the lowest outside the KL region. Nonetheless, the higher average transacted price and rent indicate that properties in PJ are still in demand from investors, buyers and tenants.”

Subang Jaya’s sampled high-rise properties witnessed a -0.29% adjustment in average transacted price q-o-q, with average rent maintained at RM2,800 monthly.

“Although its average monthly rent is relatively lower, its gross yield is performing better than that in PJ, owing to the lower capital value per unit,” explains Fong.

Shah Alam saw stable rental performance but a marginal decrease in the average transacted price. “With a gross yield of 4.1%, Shah Alam high-rise residential has emerged as another focal area to be monitored,” he notes. “We’re seeing progress in terms of price movement in Selangor, with the 3-bedroom high-rise properties recording relatively encouraging performance.”

Overall, the 2-storey terraced properties sampled across Greater KL saw mixed performance during the review period.

“Although the gross yield recorded is generally lower than that of high-rise residential, looking at the price and rental movement, landed residential showed more substantial progress in terms of recovering to pre-pandemic levels compared to high-rise residential. This indicates that landed residential is still preferred by buyers and investors and the demand has contributed to the segment’s recovery,” says Fong.

Taman Tun Dr Ismail (TTDI) saw a surge in the average transacted price of 2-storey terraced properties to RM1.7 million during the quarter.

“Owing to the higher capital value, its gross yield is relatively lower at 2.3%,” says Fong.

He notes that the average rent in TTDI is among the highest at RM3,200, the same as in Bangsar (Lucky Garden).

“Bangsar (Lucky Garden)’s average transacted price saw stable growth, surpassing pre-Covid levels. Its rental stood at RM3,200, delivering a 2.3% return to investors. TTDI and Lucky Garden have established housing schemes with improved connectivity and accessibility that put both areas on investors’ radar,” he says.

On the other hand, the average transacted price of 2-storey terraced properties in OUG has stagnated at RM845,000 from the preceding quarter.

“Nevertheless, a 5.1% y-o-y comparison was observed. The average rent stood at RM1,900. Owing to the faster increment in capital value than rental increment, the gross yield has declined to 2.7%,” notes Fong.

Cheras’ (Taman Midah) 2-storey terraced houses, meanwhile, saw a -4.43% adjustment in their average transacted price.

“Nevertheless, its monthly rental is stable at RM1,800. Owing to the drop in average transacted price, its gross yield has shown an increase to 2.9%, the highest within the KL region.”

In PJ’s SS2, the 2-storey terraced houses sampled saw an increase of 7.64% and 2.63% in average transacted price and rent respectively, indicating demand for landed residential properties in the neighbourhood, says Fong.

“On the other hand, similar properties in Bandar Utama witnessed a -5.32% adjustment in average transacted price but a 4.17% increase in average rent. This has pushed up gross yield to 2.4%, the highest since 1Q2022.”

In Subang Jaya, the 2-storey terraced houses sampled experienced a drop of 7.57% and 5.88% in average transacted price and rent respectively.

“The gross yield, however, was maintained at 2.8%. Although the decline was observed, the average transacted price of RM684,000 has surpassed the pre-Covid level of RM681,000,” notes Fong.

In Puchong, Bandar Kinrara recorded better yields of 3.5% compared to Bandar Bukit Puchong’s 2.9%, indicating better rental demand in the former, says Fong. “Nevertheless, a decline of 5.05% was observed in terms of the average transacted price in Bandar Kinrara while Bandar Bukit Puchong has maintained its average transacted price at RM700,000.”

The 2-storey terraced houses sampled in Shah Alam’s Kota Kemuning saw an appreciation in both the average transacted price and rent of 0.43% and 6.25% respectively.

“Its rental performance was higher than that in Bandar Setia Alam, which recorded a marginal 0.69% drop in average transacted price.”

In Klang, the average transacted price and rent in Bandar Bukit Raja appreciated by 4.33% and 6.25% respectively. On the other hand, Bukit Tinggi saw a -9.63% adjustment in its transacted price, while its average rent increased 7.14%.

“Owing to the relatively lower capital value and competitive rental performance, landed residential properties in Klang have delivered a better gross yield of 3% to 3.1% compared to nearby neighbourhoods,” says Fong.

The majority of active semi-detached house markets are located beyond the city centre areas, notes Fong. “This is because semidees are typically suited to big families and this group of residents generally reside in suburban areas or the city’s outskirts.”

He notes that all the 2-storey semidee schemes sampled saw relatively stable performance in terms of average transacted prices q-o-q, with the exception of PJ which was the only area that recorded a decline in values.

The sampled 2-storey semidees in PJ’s SS3 saw a 4.5% decline in average transacted price, while average rent was maintained at RM2,700 per month. “This has supported the overall gross yield of 2-storey semidees in SS3 at 2.2%, which recorded a slight q-o-q.”

“The sampled semidees in Bandar ­Kinrara, Puchong, recorded encouraging growth in average transacted price, but their relatively stable rental performance has constrained gross yield performance,” notes Fong.

Moving on to Klang and Shah Alam, the average transacted price of the 2-storey semidees sampled was stable across Bandar Tropicana Aman, Glenmarie Cove and Bandar Parkland, while Bandar Setia Alam recorded encouraging growth, he adds.

“The average rent remained steady for all the monitored schemes except for Glenmarie Cove, which recorded a 3.1% growth (in monthly rents) q-o-q. Glenmarie Cove recorded the highest gross yield of 4%, attributed to its proximity to Port Klang where there is a pool of potential expatriate tenants.”

Semidees in Cyberjaya saw a 4.5% increase in average transacted price y-o-y.

“The average transacted price is recovering but is yet to [return to] pre-Covid levels. Meanwhile, its rental performance saw a decline, which has negatively affected the gross yield.

“Nonetheless, the expansion of big data centres in Greater KL (of which 80% are in Cyberjaya) is believed to be a positive catalyst for the residential properties, particularly the semidee schemes, within ­Cyberjaya,” he adds.

Meanwhile, Fong says that ­Semenyih is a notable area as it is well connected to Putrajaya, Kajang, Bangi, Dengkil and Banting, and has developments by reputable developers such as EcoWorld, Glomac, Mah Sing, MKH, S P Setia, Sunway Property and UMLand.

“The growing trend of its monthly rental performance has further stimulated the gross yield to rest at 2.1%.”

“Overall, the performance of gross yield for the sampled 2-storey semidees averages 2.8%. As the borders are opening, coupled with the government’s review of MM2H and PVIP, we foresee a potential influx of expatriates who will occupy the semidees. Nevertheless, this is subject to the economic conditions and the friendliness of the immigration policy in Malaysia.”

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