The local real estate market is improving at a slow pace as consumer sentiment remains hampered by the prolonged post-Covid-19 effects and rising inflation, says Shylendra Nathan, country manager, Malaysia (PropertyGuru.com.my and iProperty.com.my).
Although many predict a steady upswing in the second half of the year, potential homebuyers are wary due to affordability concerns and their inability to secure financing, he said.
The recent increase in the overnight policy rate (OPR) by Bank Negara Malaysia from 1.75 per cent to two per cent has depressed purchasing confidence even further, as purchasers' and current homeowners' existing and future mortgage interest will be affected, he said.
In the current hard circumstances, Shylendra believes that consumer attitude will only improve in line with the recovery of the economic environment and the availability of government programmes that will result in better financial stability.
He claimed that buyers' "wait-and-see" approach is exacerbated by continued political insecurity and uncertainty about economic and health policies, which further dampens the market.
"While we await improvement on these external factors, sellers will have to take the initiative to incentivise buyers with attractive packages to spur the market. (But) with the lack of financial incentives to take advantage of, buyers may be hesitant to move forward with their purchasing plans until the economy restabilises," he said.
Shylendra is of the view that consumer sentiment in the market will likely only improve with the nation's economic recovery journey.
"We hope to see (this) as the year progresses. We see the potential for property demand to turn around in the coming quarters, as Malaysians with the means will be looking at property as a hedge against inflation. With the advantage of land value to factor in, the rising prices of landed properties offer larger margins for capital appreciation in the long term," he said.
According to the firm's Malaysia Property Market Report (MPMR) Q2 2022, there was a 1.1 per cent quarter-on-quarter (QoQ) and 3.64 per cent year-on-year (YoY) increase in the landed property sale price index. This comes with a 1.96 per cent QoQ dip in the landed property sale demand Index, registering a 5.21 per cent increase YoY.
"This trend in the landed property market indicates that landed homes continue to be the preferred buying option, though currently potential homebuyers are dampened by affordability issues and financial difficulties, thus resulting in slower demand," Shylendra said.
According to Bank Negara Malaysia's Financial Stability Review H2 2021, there have been visible improvements in the overall economy and financial sector.
However, the large number of unsold properties continues to be a major source of concern for the housing market. Over 180,000 housing units remain unsold, indicating that the epidemic exacerbated pre-existing affordability issues.
This is consistent with the MPMR's Supply Index, which rose 0.31 per cent QoQ and 19.1 per cent YoY in Q1 2022 based on total listed properties, according to Shylendra.
"With the rising global inflation against the backdrop of the pandemic, the return of demand will cause a bottleneck for vital commodities such as raw materials, thus pushing prices upwards. Malaysia's current large volume of unsold housing units could represent a final opportunity to snap up properties before a possible hike in development costs," he said.
Meanwhile, according to the MPMR's high-rise property selling price index, prices for stratified homes declined 0.23 per cent QoQ in Q1 2022 while increasing 0.51 per cent YoY. However, the supply of high-rise properties increased by 3.25 per cent QoQ and 18.24 per cent YoY.
Shylendra said that this implies a price mismatch when compared to buyer hunger on other variables such as location, facilities, and accessibility.
On the rental front, the high-rise property rental price index increased by 0.91 per cent QoQ and 0.2 per cent YoY, while the high-rise property rental demand index increased by 6.08 per cent QoQ and 111.23 per cent YoY.
Shylendra said this showed potential homebuyers have shifted their priorities to renting as an ideal interim option for those who have temporarily put off purchasing plans as they await economic stability.
"The consumer buying appetite is currently suppressed in this current time, as seen evidently with the increase in the high-rise property rental demand index. We have seen a steady pattern of millennials expressing a desire for well-located condominiums. However, the lack of take-up and maintenance for these high-rise units, despite the overhang, has shown a price mismatch against current buyers' appetite", he said.