The Malaysian property market is expected to stabilise in 2024 amidst economic uncertainties according to PropertyGuru Malaysia’s Property Market Outlook Report (PMO) 2024, with certain areas and submarkets positioned for more robust growth when contrasted with the broader property market.
“Though challenges persist, we maintain a cautiously optimistic outlook of the property market. 2024 will also likely witness a temporary shift in buyer interest towards the rental market as housing unaffordability continues.
“However, opportunities exist for homeowners and sellers within certain hotspots and areas with underserved demand. This coupled with easing inflation and targeted government initiatives to support homebuyers offers the promise of a more balanced market,” said Sheldon Fernandez, country manager, Malaysia for PropertyGuru.com.my and iProperty.com.my.
Price trends to stabilise
Data from Propertyguru.com.my indicates a stabilisation in the rate of home price appreciation quarter-on-quarter (QoQ). In Q1 2023, the index recorded a QoQ increase of 1.9%, followed by 2.1%, 1.5%, and 1.8% in subsequent quarters.
The housing price moderation aligns with Malaysia’s slower inflation rate. However, housing prices remain elevated, posing a challenge for first-time property seekers. Thus, it is not surprising that the Sale Demand Index, which gauges the volume of inquiries for property listings, has registered a QoQ decline of 7.4% in Q4 2023.
2023 also saw a 12.7% year-on-year increase in the PropertyGuru Supply Index. This trend mirrors the scenario in 2022, when elevated property prices motivated owners to list their properties, potentially seeking opportunities to upgrade.
“As forecast in last year’s Property Market Outlook 2023, potential homeowners grappled with housing unaffordability issues, which resulted in a muted property market in 2023.
“The wait-and-see approach adopted by many could prove fruitful, as future price trends are expected to stabilise further due to the reduced housing demand which goes hand in hand with the increase in available properties.
“With the current pause in Overnight Policy Rate (OPR) hikes coupled with moderating inflation, we are hopeful that the property market will be more favourable for first-time homebuyers by H2 2024,” said Sheldon.
Opportunities in the 2024 property market
Faced with higher homeownership costs, Malaysians have adapted accordingly by altering their preferences, where certain consumers are willing to forgo certain amenities to make homes more affordable.
According to the H2 2023 Consumer Sentiment Study (CSS) by PropertyGuru, 49% of respondents were open to giving up access to a gym for a more affordable property, while 46% were willing to forgo children’s playgrounds.
Keeping in mind that higher construction costs are expected to continue well into 2024, developers may contemplate omitting certain amenities to reduce the overall development cost, thereby enhancing affordability for consumers.
Despite the overall economic uncertainty, certain areas have exhibited resilience attributed to factors such as policy interventions and infrastructure developments.
One great example is Johor – where the anticipated Johor-Singapore Special Economic Zone and upcoming Singapore-Johor Bahru Rapid Transit Link have sparked increased demand for homes.
This contributed to rising property prices in the southern state, where the median asking price for homes in Johor increased by 9.7% year-on-year (YoY) in Q4 2023. The state also continues to attract the lion’s share of foreign property demand in Malaysia. The top three preferred residential locations by foreign buyers are Iskandar Puteri, PuteriHarbour, and Senibong
Similarly, Padang Serai, a small town in the Kulim district within Kedah, witnessed the highest YoY growth in terms of property listing views on both propertyguru.com.my and iproperty.com.my.
The demand jump is likely contributed by its proximity to the Kulim Hi-Tech Park. Moreover, Japan-based machinery CKD Corporation’s upcoming new plant in the Hi-Tech Park will further stimulate job opportunities and infrastructure development in the area.
“Our PMO report also highlights certain segments and areas that are experiencing underserved demand. Areas with a wide supply-demand gap* have significant potential for price growth and will enable quicker transactions for property sellers.
“These areas are mostly located in Selangor and Kuala Lumpur, with Bandar Sri Damansara, Bandar Baru Enstek, Serdang, Subang, and Jalan Sultan Ismail taking the top spots.
“We’re optimistic that these areas will maintain their appeal as property hotspots this year, providing leverage to property sellers in the area as well as developers with existing landbanks or planned projects,” said Sheldon.
Property market trends in Malaysia for 2024
Moving forward, PropertyGuru foresees several trends that will impact the Malaysian property sector in 2024. Among them include:
- Housing affordability issues may lead consumers to pivot to the rental market: We witnessed a notable shift towards rental properties among prospective buyers in 2023. Rental demand did ease by -4.8% QoQ in Q4 2023 due to seasonal festivities and school holidays. However, compared to pre-COVID times around 2018, rental demand remains elevated. This is likely driven by the continuously rising property prices, as PropertyGuru’s CSS H2 2023 found that insufficient savings to purchase property was the primary reason people continue to rent (65%). Nonetheless, this trend is expected to be temporary, as the government’s assistance is likely to bolster consumers’ appetite for homeownership and in turn reduce the demand for rental housing.
- Sustainability and inclusivity in the local property market: PropertyGuru’s CSS H2 2023 also revealed that 71% of respondents consider climate change when making property decisions, and 62% are receptive to the concept of green homes. Developers should take consumer’s lifestyles and interests into account when planning housing projects, as higher property prices will lead to home-seekers having more considerations for their first home. Aside from increased interest in sustainable projects, developers are collaborating with banks to address social objectives such as gender equality and the advancement of women’s rights. We expect this to continue in 2024.
- Overhang situation likely to improve further: In 2023, the government was committed to tackling the long-standing property overhang issue, establishing a special task force to identify and investigate sick/abandoned housing projects. We are currently witnessing improvement with a total of 25,311 overhang units worth RM17.4 billion recorded in Q3 2023, down by 3.7% in volume and 4.9% in value compared with the previous quarter.
“While inflation has eased, property acquisition costs are likely to stay high as developers contend with high financing and materials. This is coupled with homeowner reluctance to sell at lower prices. Both factors contribute to making the rental market more attractive for property seekers in 2024.
“Targeted government initiatives including the Housing Credit Scheme, which allocation was increased to RM10 billion under the new Budget 2024, could help alleviate homeownership costs for homebuyers.
In light of expected moderate economic growth, we urge the government to address wider challenges like the cost of living and stagnant income. Tackling these issues is crucial to stimulating demand and revitalising the market. PropertyGuru remains committed to collaborating with the government, offering valuable data insights to facilitate Malaysia’s recovery efforts,” Sheldon said.