Despite the economic growth momentum as evidenced by GDP growth of 6.2% in the 3rd quarter of 2017 (3Q2017) amidst encouraging signs in oil prices, the improved Malaysian Ringgit and business conditions, Malaysia's property market did not show much improvement in transactional activity from the downtrend that was seen since 2013. But the pace of property market slowdown had decelerated.
This is the finding by Rahim & Co in their annual publication ‘Rahim & Co Research – Property Market Review 2017/2018’ announced yesterday. It is a nationwide coverage of the property market in key sectors including residential, retail, office, hotel and industrial.
Statistics released by JPPH saw a lower transaction volume was recorded in the first nine months of 2017 (9m2017) at 229,529 for all property types against 9m2016 (239,916). The fall went at a much softer 4.3% than the previous period's 11.9% (9m2015/9m2016).
Notably, total value of transactions pulled through with a total of RM102.29 billion in transactions recorded in January to September 2017, an increase of 7.0% from RM95.57 billion in January to September 2016. This marks a rebound from the declining trends seen since 2015.
The residential sector is expected to see more projects within the “affordable range” defined by prices of up to RM500,000 in Klang Valley and lower in other less urbanised states.
Competition is expected to intensify with many developers shifting their focus within this segment. Products within the price bracket of RM250,000 to RM500,000 are performing well.
Although being affordably priced, many of these units have smaller built-up areas but are canvassed with modern concepts such as integrated developments and Transit-Oriented-Developments (TOD) which continue to be well received by homebuyers.
On the contrary, the high-end residential category remains flat with prices seeing -10% corrections in actual transactional prices in the past 18 to 24 months, or approximately 15%-20% lower than the original asking prices in the secondary market.
Rent-to-Own schemes (RTO) are seen to slowly being adopted to help address homebuyers in purchasing their homes which also help alleviate developers’ unsold units albeit circumventing the end-financing woes of purchasers.
A total of 20,304 newly completed units of residential properties or overhang units were left unsold as at 3Q 2017 - 43% more than 3Q 2016 figure of 14,193 units. This situation brings concern on how the market is to absorb the oversupply of housing units whilst buyers face the affordability dilemma.
In the office sector, oversupply concerns continue to lurk as Klang Valley’s supply reached 131 million square feet. With the incoming supply of 18 to 20 million square feet estimated to enter the market in the next few years, continued pressure will be seen on the occupancy rate and effective rental rates. Leasing activities in general continue to move at a slow pace but office spaces in well-connected integrated developments reap benefits from movement of corporate tenants seeking more favourable facilities.
The key for Klang Valley’s office market sustainability is not only to rely on organic expansion of existing tenants but to bring in new international firms & MNCs to set up offices here.
The roles and collective efforts by bodies such as InvestKL, MIDA and MITI and other agencies in both private and public sectors would be crucial along with more attractive incentives to seduce new players to set up their offices here.
In the retail category, a similar picture is seen against the backdrop of passive consumer spending.
As at 2017, there are 69.8 million square feet of retail space in Klang Valley with an average occupancy rate of 85.2%. Another 18.2 million square feet is expected to become available over the next four years, adding further pressures on retail mall owners.
In addition, the emergence of ecommerce and mobile shopping trends grew bigger as a threat to physical retail malls and has forced mall operators to re-strategize their buildings as not only a place to shop, but a venue of experience and entertainment as well.
In a move against oversupply in the residential and commercial sectors, the government has mooted a freeze countermeasure effective on 1st November 2017. Such action anticipates some degree of control to the mismatch situation. However, final details on the freeze are still being consolidated.
Moving in line with the wave of Industrial Revolution 4.0 or IR 4.0, the Digital Economy has already begun shaping new needs and wants by the consumers across the globe.
As the proliferation of e-commerce coupled with the establishment of DFTZ, industrial properties are expected to be on the radar of many players in the years to come especially for logistics and warehousing purposes.
Looking forward, 2018 will be yet another challenging year for our property market but many are hoping that the results of the forthcoming General Election would give a firmer direction for the nation hence re-igniting the momentum in the property sector.
Although it may be too soon to say that the market has bottomed out, we do not expect the market in 2018 to be much worse off than in 2017. Rather, it would be flat and stable - while waiting for the consumers' wait-and-see attitude to warm up.