Petaling Jaya: According to one of our industry partners, Juwai IQI Malaysia, the residential real estate market in Malaysia is headed for a post-pandemic rally over the next 12 months in their Property Survey and Index Q3’22, as reported by a news portal.

Juwai IQI co-founder and group CEO Kashif Ansari stated, “If they are right, then we should expect a significant increase in activity. In that scenario, people who own their own homes will benefit from the increasing values, while those who rent or are seeking to buy will have to continue to raise their budgets”.

Juwai IQI co-founder and group CEO Kashif Ansari
Source from: https://www.thesundaily.my/home/malaysian-residential-real-estate-market-headed-for-rally-in-next-12-months-EJ9469053

He further adds, “Agents expect renters to face rate increases over the next 12 months and for home prices to correspondingly rise. Those who buy now would be spared from these pressures. When you look at who has the biggest opportunity here, you see that slightly more than one-third of Malaysians aged 20 to 39 are renters. That's the highest percentage of renters of any age group,”

So you’re probably wondering, “Why is this happening, and what can I do about it?“.

We've done some research which has led us to a few conclusions about this situation and how you can prepare for the upcoming price changes. We understand this may be troubling news for some, but we hope this information can provide some relief.

1.0 Inflation

According to the Department of Statistics Malaysia, Malaysia’s inflation increased 3.4 percent to 127.4 in June 2022 as against 123.2 in the same month of the preceding year. Inflation has a snowball effect, where one thing becomes more expensive and affects the cost of other things too. This indirectly affects the expenses and profitability of landlords who rent out their properties; thus, by increasing rent, they are only covering for inflation. It’s the same effect as some of the local ‘mamak’ raising the price of their roti canai due to increased cost of cooking material, as reported by a local news channel.

2.0 The weaker Ringgit value

“The ringgit depreciated by 0.7% against the US dollar in the first quarter of 2022 (YTD as at 11 May 2022: -4.7%), broadly in line with the movement of regional currencies (1Q 2022: -0.8%; YTD: -3.4%).”, as reported by Bank Negara Malaysia (BNM). It is somewhat related to inflation; this further impacts the cost of goods sold due to lower purchasing power, which leads to the next factor, OPR.

3.0 Increase in Overnight Policy Rate (OPR)

The central bank of Malaysia (BNM) has recently announced a raise in OPR by 25 basis points to 2.25 percent. The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.50 percent and 2.00 percent, indirectly to control the stability value of Ringgit. This leads to higher home loan rates for flexi housing loans, which landlords still paying their monthly repayment need to bear. So, the rent price will often rise to cover the added cost.

4.0 What can you do?

Buy now if you can, rent if you can’t, as we have previously explained on renting or buying properties here. This is especially relevant for first-time home buyers. Here’s why:

4.1 i-Miliki - Stamp duty exemption

This is an initiative by the government to assist Malaysians, first-home buyers, in particular, to purchase properties. You can read more on this here, https://www.dwgmalaysia.com/property-news/i-miliki-announcement

4.2 Property Overhang

The National Property Information Centre of Malaysia has reported an overhang of 35,592 units @ RM22.45billion in Q1 of 2022. This means an oversupply of properties where property developers face fierce competition, offering various rebates and discounts to sell off their unsold units.

5.0 Takeaway

So if you are still renting a property but want to avoid the price hike, you should consider buying a property now, ESPECIALLY if you are a first-time buyer. However, haste makes waste, so we highly recommend that you do proper research before purchasing. If you are new to buying a property, you can read some of the relevant resources we have listed below to help you start. If you need recommendations on properties, you can start with our project in Bukit Jalil and Setia Alam, we’ve already done intensive research (so you don’t have to) to ensure a quality buy. But if you are still lost, just ask us for advice!

Disclaimer: The contents are opinionated based on personal research and are meant for point-of-view purposes only. Advice mentioned here may not be suitable for you and you should have your own independent decision regarding them.

Relevant resources:

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