One of the most obvious things about the pandemic over past two years is how it leaves huge impacts on all aspects of life. Does the same apply to the property market and will Malaysia’s house price drop 50% in 2021?
Back in the 90s, most Malaysians would have envisioned the year 2021 as the peak of human living. Technology would be an integral part of our lifestyles and everything would be much more convenient. Although we were right about the technology part, not many would’ve imagined how 2021 has unfolded.
The global pandemic and new normal has created worldwide uncertainty in almost all sectors. It’s the same story with the Malaysian property market, with many still unclear on what to expect. Here, we break the Malaysian property scene down and give insights on whether you can expect a 50% house price drop in 2021.
What is a property market
A property market is a market for properties being purchased and sold either directly to buyers or through real estate brokers. It consists of a network of sellers selling property and a corresponding network of buyers looking to purchase a property. It is also known as the housing market or real estate market.
Malaysian Property Market Outlook 2021
During the first quarter of 2021 (Q1 2021), Malaysia’s property market put in a softer-than-expected performance. Among the contributing factors include the resurging COVID-19 infections and the reimposition of stringent Movement Control Order (MCO 2.0) regulations. According to the Malaysia Property Market Index (MPMI), the overall median asking price psf in four key markets in Malaysia – Kuala Lumpur, Selangor, Penang and Johor – declined by -1.79% YoY in Q1 2021.
Malaysia’s situation is consistent with what happened to other property markets throughout the Asia Pacific in 2020. Countries such as Japan, China, and Hong Kong SAR saw price growths slide into negative territory in Q2 2020. Although house prices in China and Japan rebounded in Q4 2020, the growth was less than 1%. The property markets in Singapore, Indonesia, and India, on the other hand, have consecutive growths in prices for all quarters. However, the overall growth rate was only around 2%.
However, if we look at the market for subsale residential property, we can see a more positive outcome. According to iProperty.com.my’s H1 2021 Portal Demand Analytics (Subsale Residential Market), this property segment remained intact.
During the first half of 2021 (H1 2021), subsale residential property experienced a significant year-on-year (YoY) demand growth of +19.2%. Compared to the first half of last year, the pandemic had an adverse impact as the demand figure dipped to -2.5%.
With physical property viewing not possible due to the never-ending lockdowns, property hunters have dedicated more time to online browsing, motivated by attractive discounts offered by developers in Malaysia for the newly launched property. Furthermore, the government’s Home Ownership Campaign (HOC) has been further extended to December 2021.
Malaysian Property Market Index 2021
Below, we analyse the four key markets in Malaysia:
The overall property market experienced a -5%YoY drop in median asking prices psf during Q1 2021. However, for the subsale segment, Kuala Lumpur property posted an +8.1% growth in demand YoY. This is an improvement from its lacklustre performance in H1 2020 (+0.3%). Asking prices came down slightly due in large part to sellers of high-rise property paring down their prices. Demand for terrace houses is strong at +27.1% YoY. Asking prices are also seeing an increase of +2.9% YoY. As for high-rises, asking prices could not be sustained and have duly dropped -1% YoY. The 5 most in-demand areas in Kuala Lumpur for subsale are:
- Damansara Heights
- Taman Tun Dr Ismail
The overall property market for Selangor in Q1 2021 went against the nationwide declining prices. It remained positive and registered a +0.85% YoY growth. For the subsale segment, Selangor property grew by +17.6% YoY in H1 2021. Terrace houses are still the top choice with a +20.7% increase in demand YoY. Asking prices are still strong with a +3.5% upward revision. High-rise units, however, saw a slight drop of -1% in asking prices. The 5 most in-demand areas in Selangor for subsale are:
- Puncak Alam
- Setia Alam
- Kuala Selangor
The overall property market in Penang experienced a decline of -1.87% YoY for Q1 2021, which is slightly higher than the -1.71% YoY drop registered in Q4 2020. For the subsale segment, Penang property grew +23% YoY in H1 2021. The median asking prices, however, remained unchanged. Terrace houses are still the top choice with a +35.4% increase in demand YoY while asking prices saw a +0.7% increase. The 5 most in-demand areas in Penang for subsale are:
- Batu Kawan
- Balik Pulau
- Nibong Tebal
- Kepala Batas
- Seberang Jaya
Johor’s overall property market registered the sharpest drop in asking prices among the four key regions. It fell by -5.66% YoY in Q1 2021. For the subsale segment, Johor property demand grew by leaps and bounds to +36.5% in H1 2021 as compared to the -22.8% YoY drop for H1 2020. Terrace houses are still the top choice in Johor; many site users are keen on those 1,500 sq ft to 2,000 sq ft in size and priced between RM300,000 to RM500,000. The 5 most in-demand areas in Penang for subsale are:
- Batu Pahat
- Pasir Gudang
- Kota Tinggi
Will house prices in Malaysia drop in 2021
As revealed earlier, the overall median asking price psf in Malaysia experienced a -1.79% YoY decline in Q1 2021. According to the National Property Information Centre (NAPIC), the value of unsold housing and serviced units combined amounted to RM38.6 billion at the end of March 2021. Since developers need to get rid of unsold stock to reduce holding costs which include financing, service charges and sinking fund charges, house prices in Malaysia will likely continue to drop.
Will Malaysia’s house price drop 50% in 2021
It has already happened! In early June, a Chinese developer advertised its Danga Bay, Johor Bahru project at a 50% discount. It had a stock of about 1,000 units and needed “to sell them quickly”. The promotion went on for about six weeks and ended in mid-July. About 200 units were sold, half to Malaysians and the rest to Singaporeans. A government-linked developer also halved prices for some of its remaining units located near the National Science Centre in Bukit Kiara, Kuala Lumpur. The units were originally priced at about RM4.5 million each. Whether more developers in Malaysia will take the same course of action remains to be seen.
Is it a good time to buy property in Malaysia in 2021
The best time to buy property is when there is an oversupply situation or when people have a wait-and-see attitude about buying properties. This generally coincides with an economic downturn. 2021 is a favourable time to invest in property for the following reasons:
- Lower interest rates for your housing loan.
- Attractive stamp duty exemptions under the HOC 2020 and for first-time homebuyers as announced under Budget 2021.
- You may get a higher loan % relative to the price of the house.
Furthermore, asking prices tend to be lower when movements are restricted and rise when restrictions are relaxed.
Will property prices increase in Malaysia
In Malaysia, there has been concern that house prices will also climb, fuelled by rock-bottom interest rates, government subsidies for homeownership and pent-up housing demand during the lockdowns. However, one should realise that there is limited credit availability to support home price increases, as borrowers are constrained by tighter credit standards and limited income growth.
In Malaysia’s case, being a sector that is highly sensitive to consumer confidence and adverse events, the real estate market has yet to return to its pre-pandemic level of performance. The key to economic recovery, as well as the property sector, is rolling out the vaccine.
Earlier this year, NAPIC stated that the real estate market performance was expected to remain vigilant throughout 2021, depending on Malaysia’s economic and financial prospects. Incentives introduced under the Bantuan Prihatin Rakyat (PRIHATIN) and the Short Term Economic Recovery Plan (PENJANA) in 2020, as well as the Budget 2021, will continue to support the real estate market.
Not just that, the availability and administration of the COVID-19 vaccine nationwide is seen as a basis for preventing a wave of the spread of new infections. This will help boost business confidence, household sentiment and the general economy, which is likely to see slow growth in the real estate market in the second half of 2021.
Edited by Rebecca Hani Romeli