The residential property market in 2012

It does not help that residential property prices are constantly on the uptrend.

“Property is unique, in the sense that they’re big ticket items that are virtually recession-proof. Today, it’s at one price, tomorrow it will definitely be higher,” says one industry observer.

According to data by the National Property Information Centre (Napic), the price of the “average house” in Malaysia reached RM206,513 in the first quarter (Q1) of 2011. The price increased steadily from the previous four quarters; RM189,604 (Q1 2010), RM194,286 (Q2 2010), RM199,085 (Q3 2010) and RM203,903 (Q4 2010).

“The highest prices were recorded in Kuala Lumpur at RM438,150, Sabah at RM325,676 and Selangor at RM307,586. Johor registered the price at RM147,441 while the lowest prices were noted in Perak at RM127,096, Kedah at RM126,940 and Perlis at RM115,072.

“In Q2 2011, the price of the “average house” in Malaysia increased marginally by 1.1% to RM208,725. Kuala Lumpur continued to record the highest of all house prices at RM442,864,” said JPPH.

Next year, property price increases are expected to continue in Malaysia, albeit at a lower rate, due to rising inflation and slower economic growth.

Citigroup in a recent report says global economic growth (at current exchange rates) is expected to slow from 4% last year to 3% this year to 2.9% next year. This was a downward revision from its forecast last month of a 3.1% growth for this year and 3.2% for next.

Property consultancy DTZ Nawawi Tie Leung Sdn Bhd executive director Brian Koh reckons that housing prices could increase 4% to 5% “across the board” next year.

“We expect a soft landing of property prices next year due to rising inflation. Furthermore, people are more cautious (about their spending),” he says.

“After strong increases in property in the last two years, especially within the Kuala Lumpur area, we expect price increase to be more gradual next year,” Koh adds.

Property consultancy, VPC Alliance (KL) Sdn Bhd managing director James Wong says he does not expect the outlook for the local housing sector next year to be as vibrant as it is this year.

“The economy is facing a slight slowdown and disposable income will be less. This explains developers’ push to launch as many projects as possible.

“Next year, we are expecting less recorded transactions and launches within the primary housing market.”

With fewer launches in the primary housing market, many buyers will look to the secondary market, Wong says.

Real Estate and Housing Developers’ Association Malaysia (Rehda) in a recent briefing says it is “cautiously optimistic” of the housing market outlook in the first half of next year despite a marked increase in building material and labour costs as well as a slowdown in economic activity.

Respondents to a Rehda survey reveal that developers are more optimistic about the second half of this year than the first half of next year. Most respondents said prices would likely rise by up to 20% in the second half of this year, with 47% of respondents planning to increase selling prices by at least 15%. The survey showed that launches in the period were equally split between strata-titled and landed properties.

At the briefing, Rehda president Datuk Seri Michael Yam reportedly said the industry was concerned about how the local economy would be affected by external forces including the pressure on the sovereign debt ratings of Malaysia’s developed market trading partners.

Research houses, meanwhile, have started to downgrade the property market.

HwangDBS Vickers Research in its recent research report says there are signs of property sales slowing down, due to less mortgage applications and approvals (due to banks becoming stricter with financing margins), developers delaying launches and buyers cancelling bookings.

“Mortgage approvals and applications eased from July to August 2011, after hitting record highs in June,” it said. However, for the first eight months of 2011, mortgage approvals and applications grew 25% and 10% respectively year-on-year, which was still ahead of the total banking sector average of 20% and 4% year-on-year respectively.

The research house also says it sees a risk to Malaysia’s economic growth amid the current global financial malaise.

“As property sales correlate strongly with GDP (gross domestic product) growth, demand will likely weaken going forward, which could dampen property prices. If there is a recession (in 2012) property sales could drop by 10% year-on-year on lower volume sales and average transacted prices.” - By Eugene Mahalingam (The Star)


October 15, 2011 at 3:15 PMbeehui

before the sub-prime crisis in US, the general opinions were always very bright that the property market will never fall...... that's how a crisis could happen, it needs to have the public to believe that the market is always good and going up. Crisis won't happen if most ppl is aware about crisis....

March 20, 2012 at 11:29 AMChun Mun

The rising of the property price does not tally with the average income of Malaysian could be a crisis at the end. Job competitive from China, Vietname may shift some of the investor focus to that place. Analyst always compare the property price between malaysia and others country but they never compare the buying power of malaysian vs current property price.

March 20, 2012 at 2:07 PMtwyeow88

go thru this website, you will understand what is AFFORDABILITY. It's not only INCOME. It's INCOME + INTEREST RATE.

-our grandfather work whole life then buy 1 house using cash.
-our father work 10 years then buy house. borrow 50% for 10, 15 yrs at 8-10% interest
-we work only 3 years, already can buy property, borrow 80-90% for 25 to 35 yrs at 4-5% interest. some more can do fund transfer from credit card to pay for the 10% or draw EPF.

so, this is what it means by affordable. we should thank god we are so lucky today.

March 20, 2012 at 8:18 PMPG kia

Good definition on affordability. With lower bank loan approval, zero lock down, more rebates/discounts in the market, another cycle of "affordable" is on the way.