Landed homes continue to be the preferred buying option

While the housing market continues to face a high volume of unsold units, potential home buyers are shifting their priorities to renting but landed homes are still the preferred buying option.

Below are the main highlights of the property market trends according to PropertGuru.

• The housing market continues to face high volume of unsold units – the Supply Index continues its upward trend, gaining 0.31% QoQ and 19.10% YoY in Q1 2022 based on the overall volume of listed properties.
• Potential homebuyers have shifted their priorities to renting – the High-Rise Rental Demand Index registered a 6.08% QoQ increase, and a 111.23% YoY jump in the last quarter.
• Sower demand for home purchases with potential homebuyers continue to be bogged down by affordability, inability to secure financing, job security, and overall economic stability.

Shylendra Nathan, Country Manager, Malaysia (PropertyGuru.com.my and iProperty.com.my) says the market will likely only see an improvement in consumer sentiment in tandem with the recovery of the economic environment and the availability of government initiatives that will result in better financial security during this period.

“The “wait-and-see” approach that buyers are taking is further exacerbated by the ongoing political instability and uncertainty on economic and health policies, which further dampens the market. While we await improvement on these external factors, sellers will have to take the initiative to incentivise buyers with attractive packages to spur the market.”

Some other highlights:

• The Landed Property Sale Price Index saw a 1.10% QoQ and 3.64% YoY increase, while the Landed Property Sale Demand Index dipped 1.96% QoQ, indicative of homebuyers facing affordability issues.
• High-Rise Rental Demand Index registered a 6.08% QoQ increase and a 111.23% YoY jump in the last quarter, following dampened buying appetite amid economic recovery.
• More government initiatives are needed to spur the property market further following the expiry of the HOC.

Yesterday, PropertyGuru Malaysia announced that its Malaysia Property Market Report (MPMR) Q2 2022, powered by PropertyGuru DataSense, captured a 1.10% QoQ and 3.64% YoY increase in the Landed Property Sale Price Index.

This comes with a 1.96% QoQ dip in the Landed Property Sale Demand Index, registering a 5.21% increase YoY.

Landed Homes

This trend in the landed property market indicates that landed homes continue to be the preferred buying option, though currently potential homebuyers are dampened by affordability issues and financial difficulties, thus resulting in slower demand.

Shylendra Nathan says, “While we slowly see improvements in the market, consumer sentiments are still being affected by lingering post-COVID-19 effects. With the attention to rising inflation, potential homebuyers are cautious, seeking re-stabilisation and improved job security on the back of the current economic climate. With the lack of financial incentives to take advantage of, buyers may be hesitant to move forward with their purchasing plans until the economy re-stabilises.”

He says, “Consumer sentiment in the market will likely only improve with the nation’s economic recovery journey, which we hope to see as the year progresses.

“Meanwhile, we see potential for property demand to turnaround in the coming quarters, as Malaysians with the means will be looking at property as a hedge against inflation. With the advantage of land value to factor in, the rising prices of landed properties offer larger margins for capital appreciation in the long term.”

High Volume of Unsold Units

According to Bank Negara Malaysia’s (BNM) Financial Stability Review H2 2021, there have been visible improvements in the overall economy and financial sector. However, the high number of unsold properties remains a key issue for the housing industry. The report stated that over 180,000 units in the housing market remain unsold, reflecting pre-existing affordability issues that were worsened by the pandemic.

This is consistent with the MPMR’s Supply Index, which continued its upward trend, gaining 0.31% QoQ and 19.10% YoY in Q1 2022 based on the overall volume of listed properties.

With the rising global inflation against the backdrop of the pandemic, the return of demand will cause a bottleneck for vital commodities such as raw materials, thus pushing prices upwards. Malaysia’s current large volume of unsold housing units could represent a final opportunity to snap up properties before a possible hike in development costs.

High-Rise Rental Price Index

According to the High-Rise Property Sale Price Index in the MPMR, prices for stratified properties fell by 0.23% QoQ in Q1 2022 while only registering a 0.51% YoY increase in the same period.

However, the supply of high-rise properties continued to increase by 3.25% QoQ and 18.24% YoY. This indicates a price mismatch against buyer appetite on other factors such as location, facilities, and accessibility.

However, on the rental front, the High-Rise Property Rental Price Index moved up slightly by 0.91% QoQ and inched upwards by 0.20% YoY, while the High-Rise Property Rental Demand Index registered a 6.08% QoQ increase and 111.23% YoY jump in the last quarter. This indicates how potential homebuyers have shifted their priorities to renting as an ideal interim option for those who have temporarily put off purchasing plans as they await economic stability.

“The consumer buying appetite is currently suppressed in this current time, as seen evidently with the increase in the High-Rise Property Rental Demand Index. We have seen a steady pattern of millennials expressing a desire for well-located condominiums – however, the lack of take-up and maintenance for these high-rise units, despite the overhang, has shown a price mismatch against current buyers’ appetite”, says Shylendra.

Bogged down

Despite optimistic signs of improvements in the market and an expected gradual recovery in the second half of the year, homebuyers continue to be bogged down by affordability, inability to secure financing, job security, and overall economic stability.

Additionally, with the recent increase in the overnight policy rate (OPR) by Bank Negara Malaysia from 1.75% to 2%, buyers’ and current homeowners’ existing and future mortgage interest will be affected, further dampening purchasing confidence.

“Therefore, we will likely only see an improvement in consumer sentiment in tandem with the recovery of the economic environment and the availability of government initiatives that will result in better financial security during this period.

“The “wait-and-see” approach that buyers are taking is further exacerbated by the ongoing political instability and uncertainty on economic and health policies, which further dampens the market. While we await improvement on these external factors, sellers will have to take the initiative to incentivise buyers with attractive packages to spur the market”, the PropertyGuru country manager concludes.