Despite positive economic growth, the year 2017 saw Malaysia struggling to shrug off a severely weakened currency, international infamy due to the 1MDB scandal, and a declining property market.
While the ringgit has rallied, bursting through the start of 2018 at a high, the outlook continues to look bleak for the local property sector.
The Malaysian Reserve reports that high- and low-end properties are not expected to see any immediate rebound as affordability, excess stock, and economic and political concerns cast a dark shadow on what was once a vibrant sector.
That there is a glut in the market is now a clear understatement. Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in 10 years!
The total unsold units in Napic’s findings include overhang (completed, but unsold) units, unsold under construction units, as well as SoHo (small office/home office) units and serviced apartments.
83% of the unsold units constitutes the above-RM250,000 category and 61% of the total unsold units comprise high-rise properties, of which 89% were priced above RM250,000. The value of unsold and unutilised properties comes to an estimated RM35.5 billion.
And, with the impending general elections, consumers are exercising more caution in big-ticket long-term purchases.
Affin Hwang Investment Bank Bhd analyst Loong Chee Wei told The Malaysian Reserve that the property market is far from seeing any recovery due to the rising cost of living and the disconnect between society’s income and affordability level.
Local property investors looking to gain from property appreciation and hefty returns from the sale of properties, need to manage expectations as this year looks to be a buyers market (and a renters market). Property sales will not be as attractive as it used to be.
More’s the pity, then, given the rosy Malaysian economic outlook for 2018 and the steady ringgit growth. Public Investment Bank Bhd’s research arm reports that Malaysia is slated to become the second fastest growing economy in Asean.
With the local property market at an uncertainty, some investors bide their time and jump at the opportunity to invest when the price is right (e.g. offered at fire sale prices), and then hold until the property market cycle goes into an upward trend, before they sell for a profit.
Others diversify their investments into high-yielding, growing markets overseas, such as Australia and the UK, where the currency is stronger, hence rental returns and appreciation are at a higher value than the ringgit.
Unlike Malaysia, these countries are facing critical undersupply in housing due to population growth as a result of migration, jobs creation and educational opportunities.
“The UK and Australia have strong growth potential. The population and its demand for housing have grown faster than supply, causing property prices to keep appreciating. It is also because of this, that there is a strong rental market,” says property expert Virata Thaivasigamony of CSI Prop.
“With the current and forecasted performance of the ringgit, alongside the weakened pound and Australian dollar, investors now have the opportunity to invest from a position of strength. Diversifying investments is key to hedging against uncertainties both locally and globally.”
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