Malaysia Property Market Report Q2 2023 - Quick Review
According to PropertyGuru Malaysia Property Market Report Q2 2023, Malaysia's economy grew by 7% and had a full-year growth of 8.7% in 2022 influenced by the recovery of the labor market and domestic demand.
While the tourism sector and electrical and electronic exports performed well, the inflation remains a concern for home seekers. The central bank, Bank Negara Malaysia (BNM), extended its OPR rate pause in response to cooling inflation. The overall economic recovery has had a positive impact on the residential market, with a 22.3% increase in transactions in 2022, totaling RM94.27 billion. The number of residential overhang units decreased in Q4 2022 to 27,746, worth RM18.41 billion, representing a decline of 24.7% in volume and 19.2% in value.
In simpler terms, property purchases have increased, and there are fewer unsold properties available in Q4 2022. Hence, the government has since increased the OPR rate in May 2023 to reduce consumer spending and borrowing, in response to the excessive demand and prevent prices from rising too rapidly.
The Malaysian Property Sale Market Index
In Q1 2023, asking prices continued to rise for the fifth consecutive quarter, increasing by 1.6% compared to the previous quarter. This follows a 1.5% increase in Q4 2022. The Sale Supply Index, dropped by 0.6% after a 1.0% decline in Q4 2022 and the Sale Demand Index decreased by 5.6% compared to the previous quarter.
Why did the property market Price Index increase?
Supply and Demand:
Prices tend to rise if there is a higher demand for properties compared to the available supply. Despite residential overhang units being available in the market, limited supply and increased competition among buyers can drive up property prices in popular locations.Economic Growth:
Strong economic growth often leads to increased demand for properties. When the economy is thriving, as reported in Q4 2022, purchasing power increases, leading to higher demand in real estate, which can push prices upward.Interest Rates:
Low interest rates are encouraging for prospective homebuyers to purchase property due to lower monthly repayments, potentially pushing higher prices. For property sellers, this will translate to a more favorable holding condition, where they can hold their property at lower monthly repayments before selling when prices increase further.
Why is there a decrease in the Sale Supply Index?
Property Investors Speculation Activity:
The current conditions motivates existing property investors to hold onto their properties, opting to the rental market while speculating future resale at higher prices, driving market prices upward.Seasonal Factors:
Seasonal factors can contribute to a decrease in the Sale Supply Index. Property owners are likely to delay listing their properties for sale during holiday seasons or school vacations, leading to a temporary decrease in the available supply.Why is there a decrease in the Demand Index?
Affordability Constraints
High or increasing property prices make properties less affordable resulting in potential buyers holding back on purchasing or opting to rent instead.
Rising Interest Rates:
Higher interest rates, such as the latest increase in OPR rates to 3% in May 2023, increase borrowing costs for homebuyers. As mortgage rates rise, it becomes more expensive to finance property purchases, deterring potential buyers from entering the market.
Despite an increase in the Price Index, where sellers should be excited to sell their property, there’s a decrease in the sale supply index followed by a decline in the demand index. This scenario indicates a complex market situation that will result in a slowdown in overall market activity.
The Malaysian Property Rental Market Index
According to DataSense, in Q1 of 2023, the Rental Demand Index experienced a consecutive decline of 6.3% compared to the previous quarter. Despite this decrease, rental demand remained higher than the levels seen prior to the first quarter of 2022. The drop in rental demand can be attributed to a substantial surge in rental prices, as indicated by the 4.7% quarterly increase and 15.3% year-over-year growth in the Rental Price Index.
Conclusion
Based on indicators generated by DataSense and what is published in PropertyGuru Malaysia Property Market Report Q2 2023, the current property market reflects a trend of rising property prices as sellers anticipate further price appreciation. Simultaneously, potential property buyers are exercising caution and refraining from immediate purchases due to a variety of factors. As an alternative, they are considering the option of renting properties instead. Additionally, there is a segment of potential buyers who are neither buying or renting, possibly indicating a preference for staying in their family homes.
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