The Malaysian economy continued to strengthen, recording 14.2% growth in the third quarter of 2022. The strong expansion was driven by robust domestic demand amid improving labour market conditions following reopening of all economic sectors as well as on-going policy support.
Based on the improved performance, Bank Negara Malaysia (BNM) expects full-year growth to exceed the forecast of 7%. Headline inflation increased to 4.5% in the third quarter of 2022, primarily due to the base effect of electricity tariff rebates introduced in 2021.
“Nonetheless, it is seen to be moderating from 4.5% in September to 4.0% in October 2022 and is expected to average at 3.3% in 2022,” said Knight Frank Research in the Real Estate Highlights 2nd Half 2022 Report.
On the lending front, due to the positive growth prospect of the Malaysian economy, BNM raised the overnight policy rate (OPR) again by 25-basis points to 2.75% on 3 November 2022. This rate hike, the fourth in the year, will likely influence purchasing decisions due to higher borrowing costs.
Notwithstanding this and the end of the home ownership campaign (HOC) in December 2021, the residential property market has improved in the first nine months of 2022, recording 181,167 transactions worth RM70.65 billion nationwide, representing a 34.6% increase in volume and 35.0% increase in value year-on-year.
However, while the number of new residential units put on the market increased by 11.2% during the review period, it was lower on a quarterly comparison – 10.0% in third quarter of 2022 and -1.8% in quarter two of 2022.
The delay in new launches may be attributed to market uncertainty that warrants review of projects which are still in the planning stage. In the third quarter of 2022, the Malaysian House Price Index (MHPI) was moderately higher by 0.7% year-on-year (y-o-y) although on a quarterly comparison with quarter two 2022, it retreated 2.1%.
The Federal Territory of Kuala Lumpur (WPKL) saw a total of 9,821 residential units worth RM8.93 billion changing hands in the first nine months of 2022, up 27.7% and 30.1% respectively.
In the condominium and serviced apartment categories, a total of 7,052 units worth RM6.06 billion were transacted, representing annual increments of 36.1% and 53.0%, respectively. During this review period, the analysed average value per transaction was higher by 12.4%.
Supply & Demand
As of the second half of 2022, the cumulative supply of high-end condominiums / residences in Kuala Lumpur stood at 71,704 units following the completion of six projects, contributing an additional 3,059 units to the existing stock. The uptick in construction activities in line with economic recovery has led to more new completions during the review period.
Moving forward, several projects, scheduled for completion by the first half of 2023, will add circa 6,989 units to the existing high end residential stock.
Prices & Rentals
During the review period, secondary transactions of high-end condominiums were steady across the selected localities. The positive outlook follows the resumption of economic activities, improvements in labour market conditions coupled with the return of expatriates which further support the Kuala Lumpur high-end residential market.
Overall, the average transacted prices of high-end condominiums / serviced apartments in Kuala Lumpur were marginally higher (circa 3.0%) in the second half of 2022 when compared to the preceding period.
The average asking rentals of high-end condominiums and serviced apartments in the localities of KL City, Ampang Hilir / U-Thant and Damansara Heights were marginally higher while in Bangsar, the rentals showed a downward trend.
Moving forward, the overall rental market is expected to remain in the positive territory, accompanied by new completions with upgraded features, commanding higher rentals as compared to older schemes.
Outlook
The first half of 2022 ended on a positive note evident from robust sales volume and higher sales value. Looking ahead, Budget 2023 which will be re-tabled early next year, is expected to include new measures and initiatives to boost the overall economy and property market.
In the earlier tabling of Budget 2023 in October, main highlights included a 2% reduction in income tax, which means that people will have more money in their pockets in 2023 to partly offset higher borrowing costs and the increase in stamp duty exemption from 50% to 75% for residential properties priced above RM500,000 to RM1 million which will end on 31 December 2023.
The latter will complement the previously announced 100% stamp duty exemption for the memorandum of transfer for homes priced RM500,000 and below until the end of 2025.
Meanwhile, with the recurring periods of heavy rain that caused flash floods, there has been an increased awareness of environmental issues that have become one of the key considerations when it comes to buying, investing or renting a property.
Discerning buyers now seek quality and sustainable features such as solar panels, rainwater harvesting, food waste composting, and electric vehicle charging stations when considering property purchases although buying homes with these criteria may come with a premium.
In promoting and addressing sustainability in projects, Eco World Development Group Bhd and Public Bank Bhd have signed a memorandum of understanding (MOU) to provide green and sustainable development financing.
With this MOU, Public Bank will offer its Special Sustainable Financing Package for customers who purchase properties developed by Eco World that have been certified green by Green Building Index, GreenRE and other accreditation bodies.
Similarly, Sunway Integrated Properties Sdn Bhd (Sunway Property) has also signed a MOU with Public Bank Berhad to collaborate on sustainable development projects.
With this MOU, customers who purchase green-certified properties developed by Sunway Property are eligible for Public Bank’s Special Sustainable Financing Package.
Meanwhile, AmBank has entered into a RM100 million green financing facility with Kerjaya Prospek Property Bhd for the development of Courtyard by Marriott Hotel in Bloomsvale. Located at Old Klang Road, Bloomsvale is a mixed-use project that includes a hotel, serviced apartments, office suites, and a shopping mall.
The project will be certified with GreenRE’s platinum rating for its residential, and gold rating for the commercial buildings. Despite improved performance in second half of 2022, the short-term outlook for the housing market remains challenging due to elevated inflation and potential hikes in OPR.
Given these factors and the expected economic slowdown in 2023 (both domestic and global), potential property buyers and investors may turn cautious and adopt a wait and see approach.
However, the recently concluded general election, which resulted in the formation of a unity government, is expected to steer the country towards better political stability and this augurs well to cement Malaysia’s position as an attractive investment destination. Looking ahead, with better economic prospects, the country’s property market is expected to be sustained.
