The real estate consultant firm highlighted that 2015 had been a challenging year with the rising costs of living, worsening scenario of crude oil and commodity prices as well as the depreciating Ringgit – causing volatile economic conditions and depressed consumer sentiments across the country.
The Malaysian economic performance, measured by Gross Domestic Product (GDP) growth was at 6% in 2014 but slowed down to 4.7% in Q3 2015.
The Malaysian Institute of Economic Research’s recently released Consumer Sentiment Index pointed out a new low of 63.8 for Q4 2015. Considering the challenges in the environment, the market has generally been cautious.
The Property Market Review 2015/2016 reported that the total number of property transactions in 1H 2015 was recorded at 186,661, a drop of 3.5% as compared to 1H 2014 with 193,405 transactions. Meanwhile, the total transaction value also experienced a decline by 6.6% to RM76.6 billion.
“This declining trend has spanned over 1.5 years since 2H 2013. Despite the slowdown of total property transactions nationwide, average property prices are appreciating, but at a slower pace compared to the past 2 to 3 years,” said Sulaiman Akhmady, Director of Research and Strategic Planning of Rahim & Co.
The subdued activity is expected to continue throughout this year.
On Budget 2016
Rahim & Co also highlighted in view of the Budget 2016 announced last October 2015, there were neither cooling measures nor market boosters such as reduction in RPGT and reintroduction of DIBS made by the Government.
“We felt that the minimal-intervention stand by the Government in the property sector was appropriate as the market should correct itself based on the open market and its available liquidity, especially for those selling at normal price within the middle to upper range houses,” said Senator Tan Sri Dato’ Abdul Rahim Abdul Rahman, Executive Chairman of Rahim & Co.
“The market should find its own natural equilibrium as it should go down to the fundamentals of supply and demand,” he added.
The recalibrated Budget 2016 is expected to save the Government over RM9 billion in operating and development expenditures.
“The recalibration was more focused on easing the rakyat’s burden of daily costs of living as well as broadening and increasing the efficiency of government revenue sources and collection,” Rahim commented.
Responding to the new policy introduced by the Government to limit houses priced up to RM300,000 for only first-time house buyers, Rahim noted that this move will be beneficial for the younger generation.
“This move will further encourage home ownership among Malaysians as well as to discourage speculative activities in the property market. However, there must be a clearer definition for a clearer guideline on this matter as this new policy is still quite vague,” he elaborated.
The Budget 2016 recalibration also highlighted that the GDP growth forecast for this year had been toned down to between 4 – 4.5% from the initial forecast of 4 – 5%.
“Even though the economic situation is expected to be challenging, growth enablers such as major infrastructure projects and initiatives that were announced in the Budget 2016 will continue,” Rahim enthused.
Property market to experience slower growth
“The property market is expected to be challenging with moderate activity this year. The market will remain cautious whereby buyers are definitely becoming more discerning in their purchases across all sectors,” he explained.
The numbers of real estate transactions for all property sectors have showed muted growth with a decrease of 3.5% from 193,403 units transacted in 1H 2014 to 186,661 units transacted in 1H 2015. The total value of transactions also dropped by 6.6% from RM82.03 billion to RM76.61 billion.
“Property prices are still expected to rise but more marginally for the residential sector. Depending on the location and type of property, some may see price consolidation as the gap between sellers’ asking prices close towards buyers’ expected prices,” Rahim & Co noted.
For the residential sector, number of transactions of properties priced between RM400,000 to RM1,000,000 dropped from 23% in 1H 2014 to 19.2% in 1H 2015. This signifies a market slowdown in 2015, especially in Johor with a decrease of 3,390 or 18.1% of residential transactions in 1H 2015 as compared to 1H 2014. There is also a decline in total transaction value for residential properties by 9.7% compared to 1H 2014, dropping from RM40.3 billion to RM36.4 billion.
The consultancy firm noted that more affordable housing projects are being planned and launched by both the public and private sectors.
Budget 2016 included the government’s target numbers for affordable houses to be provided by various government agencies. PR1MA is expected to provide 175,000 affordable housing units whereby 74,339 units are currently in various stages of construction.
For the commercial sector particularly the office sector, Kuala Lumpur’s total supply of office space currently has reached 88.9 million sq ft in 1H 2015 with average occupancy rate remaining stable at 81%.
Sulaiman expects the office sector to remain challenging due to greater incoming supply into the market. Prices and rental rates are expected to be competitive with the same factor affecting the retail sector.
“Looking forward, the absorption rate of office spaces is expected to slow down hence we predict an increase in vacancy rates. About 8 million sq ft of office space in Kuala Lumpur are expected in the pipeline by 2020,” Sulaiman said.
“Retail sales are expected to face some tougher times, fuelling the pressure in rental rates amidst decaying consumer sentiments. The market will still remain cautious, with buyers definitely becoming more discerning in their purchases across all sectors, while expecting bargain purchases to slowly creep up in the market.”
• Heightened interest along transportation lines.
• More affordable houses are under planning and under construction.
• Rationalisation of luxury high-end residential segment with slower take-up rate.
• Office property market remains challenging with new supply looming.
• Rental rates will be under pressure.
• Modern design & facade within an established address will give potential for higher rental.
• There will be market preference for MSC and green rated buildings.
• More malls are being completed and under construction, but there will be challenges in filling in new spaces.
• Restraint of consumer spending due to challenging economic situation.
• Success stories dependent on development’s accessibility, mix and management.
• Regional pricing comparative advantage.
• Demand for industrial buildings on the rise.
• There will be more specialised industrial parks.
• There will be an influx of managed industrial parks.
This article was first published in the iProperty.com Malaysia March 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine. Better yet, order a discounted subscription by putting in your details in the form below!