With the first seven months of the year already done and dusted, we are well into August 2018 and the second half of the year. There have been many changes since the first half, especially with the results of the general election in May which saw Malaysia welcome a new government, along with many changes and reviews of housing-related policies. Thanks to Kit, Au-Yong who is a registered valuer and consultant, real estate agent, property manager, and auctioneer (plus good friend of Estate123.com), we have a unique inside look into Malaysia’s property market outlook for the second half (2H) of 2018.
Overall Malaysia Property Market in 1Q2018
The Malaysian economy is expected to grow at a moderate pace for this year as well as for the next year after recording better-than expected growth last year. It is estimated that growth in the Malaysian economy will remain favourable for the remainder of 2018, with domestic demand as the key driver by leading indicators from the Business Conditions Index (BCI) and Consumer Sentiments Index (CSI). In fact, the Malaysian Institute of Economic Research (MIER) Consumer Sentiments Index (CSI) survey shows that consumers are finally upbeat about the economy after being in the doldrums for the past four years. Consistent with CSI, businesses are also upbeat about the economy. The 2Q2018 MIER’s Business Conditions Index (BCI) rebounded strongly recording the highest level over the last 3 years.
The number of property transactions have jumped in the first quarter (1Q) of 2018, particularly in commercial property, compared to the same period a year ago. Likewise, transaction volumes have also increased in 1Q 2018 from 1Q 2017.
Meanwhile, according to changes in NAPIC’s House Price Index, the overall price for residential properties have dropped to a five-year low of 6.5% in 2017. It is interesting to note that only terraced houses saw a 9.0% increase in price, while high-rise (5.1%), bungalow (4.3%) and semi-detached (4.0%) units reported a drop in prices.
Investment activity in Malaysia is brisk, supported by projects and business sentiments that are largely positive. Outstanding housing loan is maintained at 8.9% (for both 1Q 2018 and 4Q 2017), while the 71.5% loan approval rate for houses below RM500,000 is considered fairly high. Growth rate of loan for three or more houses (speculative purchases) stands at 0.8% while impairment and delinquency ratios is 1.1%. Overall, a positive outlook for the Malaysian property market.
Malaysia Property Outlook for 2H2018
As announced by the Housing and Local Government Ministry (KPKT), there will be some major changes in Malaysia’s housing-related policy, particularly for affordable housing. Administration of the affordable housing sector will be consolidated into one agency, while the product characteristics of affordable housing will be determined according to income group and state. As for foreign purchasers policy, foreign buyers will be subject to various policies and restrictions, such as the purchase of minimum RM1 million properties and leasehold properties. Proper planning control changes is also important to ensure that overdevelopment does not occur, while making sure the property overhang does not become worse. Credit policies must also be reviewed so that more people, especially first-time buyers, are able to own a home. Besides that, changes have also been proposed to implement a social based system in Malaysia which caters to the population’s demand for affordable housing, versus the market-based system in which developers may prioritise luxury developments for higher profit but does not address the lack of affordable homes issue.
In addition, the effect of economic policy changes such as Goods and Services Tax (GST) and upcoming Sales and Service Tax (SST) will also have an impact on the property market in Malaysia. These taxes will inevitably be transferred by the developer to the buyer, which in turn will affect property prices. That is why exemptions and incentives must be put in place to encourage developers to build more affordable housing in key areas within each state. On a larger scale, these economic policy changes have also lead to the review of many key real estate projects, not only for residential and commercial projects, but also mega-projects such as the Kuala Lumpur-Singapore high-speed rail (HSR), as well as the Penang Transportation Master Plan (PTMP) and East Coast Rail Link (ECRL), just to name a few.
As for property market prospects, real estate agencies such as Rehda, MIEA, and NAPIC are optimistic that the Malaysian property market is gradually looking upwards, with the market treading flat to slight uptick in sales volume and transactions.
The many factors that affect the property market in Malaysia are also important when it comes to investment or homeownership. Read all about these factors that affect property in Malaysia in the second half of 2018.
Overall, the property market in 2H2018 seems to be looking upwards, but investors should still be alert to policy changes and make rational decisions based on research and critical judgements.