This article first appeared in City & Country, The Edge Malaysia Weekly on September 16, 2024 - September 22, 2024

On Sept 4, over 700 industry leaders and experts congregated at M Resort & Hotel Kuala Lumpur to attend UEM Sunrise Bhd’s (KL:UEMS) Form to FUTURE Real Estate Forum, held in collaboration with investment advisory firm CLSA Malaysia, Khazanah Nasional Bhd and Advancing Malaysia.

In a panel discussion titled “Market Landscape: Growth Drivers and Trends”, panellists shared their insights on the major drivers that are shaping the real estate market. They were Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, Urbanmetry founder and CEO Koh Cha-Ly and JLL Malaysia chief growth officer Christophe Vicic.

Key takeaways from this discussion were that changing demographics will have an impact on housing demand, Malaysia will continue to be an attractive investment destination, and the need to harness the potential of big data.

Changing demographic trends, such as mindset change, an ageing population, urban migration and household dynamics, will shape Malaysia’s real estate demand, according to SERC’s Lee.

During the discussion, Lee said while home ownership in the country is high at 76.9%, this could change due to the different mindset of the younger generation.

“The young cohorts — the Gen Ys and Gen Zs — may think, ‘Why should I own a house?’. Also, affordability is a big question now for them. They may prefer to rent instead as they may not be able to afford a home,” he added.

In terms of population growth, Lee said: “Malaysia’s population growth is about 1.1%, with fertility rates declining. I think this will have an impact on productivity and labour force participation, which in turn will affect housing demand.”

This led to the topic of the country’s ageing population. “Malaysia is projected to be an ageing nation, with about 15% of the population consisting of those aged 60 and above by around 2030 or 2040. This will impact real estate demand as well,” said Lee, explaining that it will lead to greater demand for healthcare facilities for the elderly.

“As for the younger population, they will be more tech savvy. We see a change in lifestyle preferences. Some may need more space allocated for remote working at home, homes that are equipped with smart and/or sustainable features. This will also affect demand for retail and commercial space.”

With regards to Malaysia’s attractiveness to investors, Lee said the world has witnessed three major events since 2020 — the Covid-19 pandemic, Russia-Ukraine war and escalating tensions in the Middle East — and these will have a bearing on investments.

“I believe these shocks will continue, especially geopolitical tensions and the resulting trade war, with the outcome of the US presidential election later this year likely to have an effect as well.”

Hence, Malaysia would be a sweet spot for investments amid the geopolitical tensions, he pointed out.

“Malaysia is now focusing on reshoring and friendshoring due to these tensions. There will be demand for different asset classes, including commercial spaces such as retail and warehousing.”

Another factor that will influence investment decisions is stable interest rates. “The overnight policy rate should remain unchanged at least until next year, despite the [imminent] rate cut by the US.”

In addition, Lee highlighted how Malaysia continues to attract both domestic and foreign investment. “For the past year, the property index of the Malaysian stock market has surged significantly. In the first half of 2024, there [was] strong momentum in terms of private investments in the local economy. There is also a strong upturn in the construction sector. I believe this reflects the confidence of domestic and foreign investors in Malaysia.”

Echoing similar sentiments, JLL Malaysia’s Vicic said the country is recording increased investments and interest from the US and China, driven by geopolitical tensions in Ukraine, Russia and the Middle East, as well as rising labour costs in China.

He said Malaysia is an attractive investment destination due to the population’s language skills, skilled labour, reliable energy resources, reasonable power costs and the country being generally spared from natural disasters.

“However, we need to think about boosting and gaining more investment from our competing neighbours. There is still a bit of work to be done to ensure Malaysia is seen as a natural choice when both internal and external investors consider their investment opportunities,” added Vicic.

In terms of big data, Koh of data analystics firm Urbanmetry said its full potential has not been harnessed in the real estate sector. She explained that big data goes beyond simple surveys and instead provides future-planning capabilities. “It factors in data such as geopolitical movements, consumption patterns and where people are spending their money. And these are going to be indicators of what will happen to property prices, for instance.”

She also called for industry leaders to take into account the dynamic nature of the industry. “While the stars may be aligning, they are also misaligning as fast as they align. We are in a constant state of change, and this means we need to harness big data in real time for us to provide a timely response.”

Additionally, Koh highlighted that big data can also be used to help in the construction and design of houses that will meet the needs of the buyers. She told participants at the forum that a mindset change is needed to ensure that the data collected will benefit house buyers in the future.

Changing demographics, Malaysia’s attractiveness to investors and the use of big data are some factors the country needs to look at to ensure the real estate market stays buoyant and relevant.

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