The global outbreak of the novel coronavirus (2019-nCoV) may see increased interest in domestic properties from international purchasers in the coming quarters, says PropertyGuru Malaysia country manager Sheldon Fernandez.
Fernandez expects strong interest to purchase properties here, especially in Penang, where foreigners can buy stratified properties priced above RM1 million on the island while on the mainland, they can get stratified properties above RM500,000 and landed properties from RM1 million.
Without mentioning where the international purchasers will likely come from, Malaysia has seen strong interest in the past, particularly from China, Hong Kong, Singapore, and Indonesia.
The Malaysian housing market remains attractive to foreigners and expats who either wish to live or invest here because the homes are affordable and offer reasonable returns.
Fernandez said regional unrest has seen a rise in foreign interest in Penang, given its relatively attractive pricing and location.
“Industry players are taking advantage of this situation to clear unsold units by offering various incentives to lure international buyers to the state,” he said.
According to the PropertyGuru Malaysia Property Market Index (MPMI) Q1 2020 report, Penang was the only state to report a decrease in residential supply, contracting by 13.51 index points year-on-year (YoY), though stock grew marginally by 0.94 points quarter-on-quarter (QoQ) in Q4 2019.
Fernandez said this may be attributable to diminishing land availability on Penang Island.
“As such, though asking prices dropped by 0.35 index points from 95.74 in Q3 2019 to 95.39 in Q4 2019, continuing demand for residential properties on the island may lead to an uptick once macroeconomic conditions improve. This is balanced by cautious stance towards overdevelopment adopted by the Penang state government in recent years, with incentives to be given to developers who focus on developing affordable units,” said Fernandez.
Return of the property market
The overall property market has been on declining stage since the fourth quarter of 2016 (Q4 2016) but some goodies announced recently could return it to positive levels.
Fernandez said developers and owners across the board are tempering their expectations as the industry adjusts to the closing of the 2019’s Home Ownership Campaign (HOC) and a lack of strong catalysts this year.
“However, impacts here may only be apparent in 2021 and later, due to the delayed purchasing decisions inherent to rent-to-own (RTO) schemes,” said Fernandez.
The overall MPMI for the country dropped by 1.04 index points from 89.94 in Q3 2019 to 88.90 in Q4 2019, representative of a longer-term decline.
However, these adjustments, in conjunction with the overnight Policy Rate (OPR) cuts by Bank Negara Malaysia (BNM) in January and the emphasis on RTO serves to make property in Malaysia a buyers’ market in the near term, said Fernandez.
Fernandez said, the OPR cuts does make it an opportune time for property seekers in Malaysia.
“The OPR cut often leads to lowered interest rates for loans and there will be short-term hikes in approvals,” he said.
On the RTO, Fernandez said the scheme reduces the upfront costs and risks of home ownership by doing away with down payments and allowing participants to opt out of purchases.
“In line with our goal of helping Malaysians make informed and confident property decisions, it should be noted that RTO financing may cost more in the long run than conventional loans,” he noted.
Meanwhile, Fernandez is expecting positive take-up in newly completed serviced apartment units with buying interests from young professionals and double-income couples with no-kids (DINKs).
“Confidence in this sub-sector may be due to a rising desire among young professionals and DINKs to live closer to urban centres and places of work to overcome the inconvenience of travel time and cost. In this scenario, mid-sized serviced apartments in well-connected locations that are either directly linked or close to commercial amenities are benefiting from increased demand. However, this is highly dependent on area, and should be approached cautiously given the current oversupply of a high-rise in some localities.”
National Property Information Centre (Napic) H1 2019 figures show a 56 per cent YoY increase in newly completed serviced apartment units, as well as 13 per cent YoY increase in incoming supply currently under construction. Altogether, this will add another 38,441 serviced apartment units to existing stock of 228,242 in the market.
Moderation in major areas
According to the MPMI report, the Kuala Lumpur market contracted by 1.35 index points from 96.25 in Q3 2019 to 94.90 in Q4 2019, despite concerted efforts to address oversupply issues including Budget 2020’s revision of foreign ownership thresholds from RM1 million to RM600,000.
Prices are likely to continue their downward trajectory, with supply seeing a 28.8-point increase QoQ, and 87.56-point growth YoY in Q4 2019.
Fernandez said this will likely see developers and property owners adjusting prices to remain competitive, prolonging the downturn.
He said, the incoming supply of residential properties reflects sustained long-term confidence in Kuala Lumpur as a hotspot, although this influx into a region that is already coping with sizeable existing stock does not suggest that the price average will be moving upwards in the near term.
Selangor showcased the most stable asking prices among Malaysia’s major markets, with its MPMI dropping just 0.08 index points from 91.51 in Q3 2019 to 91.43 in Q4 2019. While this downtrend mirrors similar patterns in other markets, Selangor’s minimal price movements in the past quarter may indicate an adjusted equilibrium for the state moving forward.
“Given Selangor’s existing stock of 1.5 million residential units, along with 4,620 newly completed units and 6,872 planned units according to Napic, developers are adopting various strategies to stimulate demand. These include low entry costs and financial assistance programmes by some developers,” he said.
In Kuala Lumpur, the supply of residential properties in Selangor increased significantly by 84.57 index points YoY, underscoring its desirability as an economic powerhouse for the nation.
“This accounts for continued developer interest in the state, as industry players focus on its long-term potential.”
In Johor, asking prices fell 1.53 index points from 101.12 in Q3 2019 to 99.59 in Q4 2019, following a period of relatively stable performance for the state over the past few quarters.
Fernandez said this comes despite strong investor interest in the area, having realised investment figures of RM172.2 billion in H1 2019, with a target of RM383 billion by 2025.
The downtick can be attributed to ongoing oversupply concerns in the state, with available residential properties increasing 25.32 index points QoQ and 185.44 points YoY in Q4 2019 – much higher than equivalent figures in Kuala Lumpur and Selangor.
Johor is experiencing both overhang and oversupply issues in its residential stock.
“It remains to be seen whether the state government’s decision to lower foreign ownership thresholds to RM600,000 for the first nine months of 2020 will impact these numbers, given the policy’s muted impact elsewhere,” said Fernandez.