ASKING prices for properties in Malaysia have declined as a result of the recent overnight policy rate (OPR) cut and Budget 2020’s emphasis on rent-to-own (RTO) schemes. These factors serve to make the property market a buyers’ market in the near term.
According to PropertyGuru Malaysia Property Market Index (PMI) 1Q 2020 report, the overall PMI for the country dropped by 1.04 index points from 89.94 in 3Q 2019 to 88.90 in 4Q 2019, representative of a longer-term decline.
“Asking prices have been on the downtrend since 4Q 2016, bringing the costs of home ownership down with them.
“In addition, overnight policy rate (OPR) cuts by Bank Negara, such as the one in January often lead to lower interest rates for loans and short-term hikes in approvals, making it an opportune time for property seekers,” said PropertyGuru Malaysia country manager Sheldon Fernandez.
He added that RTO schemes reduce the upfront costs and risks of home ownership by doing away with the downpayment and allowing participants to opt-out of purchases.
These factors serve to shore up home seeker sentiment, though not to the extent of 2019’s Home Ownership Campaign (HOC). However, impacts here may only be apparent in 2021 and later, due to the delayed purchasing decisions inherent in RTO schemes.
“In line with our goal of helping Malaysians make informed and confident property decisions, it should be noted that RTO financing may cost more in the long run than conventional loans,” said Fernandez.
Nevertheless, developers and owners are tempering their expectations as the industry adjusts to the end of the HOC and a lack of strong catalysts this year.
Other notable trends include an increase in serviced apartments coming into the market.
National Property Information Centre (Napic) 1H 2019 figures show a 56% year-on-year (yoy) increase in newly completed serviced apartments, as well as 13% yoy increase in incoming supply currently under construction.
Altogether, this will add 38,441 serviced units to an existing stock of 228,242 in the market.
“Confidence in this sub-sector may be due to a rising desire among young professionals and DINKs (double-income couples with no kids) to live closer to urban centres and places of work to overcome the inconvenience of travelling to work,” said Fernandez.
“In this scenario, mid-sized serviced apartments in well-connected locations that are either directly linked or close to commercial amenities are benefiting from increased demand.
“However, this is highly dependent on area, and should be approached cautiously given the current oversupply of high-rise units in some localities.”
Finally, the global Covid-19 outbreak, while having no direct impact on Malaysia’s property segment to date, may see increased interest in domestic properties from international purchasers in coming quarters, particularly in Penang.
Penang was the only state to report a decrease in residential supply, contracting by 13.51 index points yoy, though stock grew marginally by 0.94 points quarter-on-quarter in 4Q2019.
This may be attributable to diminishing land availability on Penang Island. As such, though asking prices dropped by 0.35 index points from 95.74 in 3Q 2019 to 95.39 in the fourth quarter, continuing demand for residential properties on the island may lead to an uptick once macroeconomic conditions improve.
The Kuala Lumpur market contracted by 1.35 points from 96.25 in 3Q 2019 to 94.90 in 4Q, despite concerted efforts to address oversupply issues, including Budget 2020’s revision of foreign ownership threshold from RM1 mil to RM600,000.
Prices are likely to continue their downward trajectory, with supply seeing a 28.8-point increase quarter-on-quarter (qoq), and 87.56-point growth yoy in 4Q 2019. This will likely see developers and property owners adjusting prices to remain competitive, prolonging the downturn.
However, Selangor showcased the most stable asking prices in the country, with its PMI dropping just 0.08 index points from 91.51 in 3Q 2019 to 91.43 in 4Q.
While this downtrend mirrors similar patterns in other markets, Selangor’s minimal price movements in the past quarter may indicate an adjusted equilibrium for the state moving forward. – Feb 18, 2020
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