Malaysian Property market outlook in Year 2022
NAPIC: Property market improved in 2021 but challenges remain
Malaysian property market performance improved year-on-year (y-o-y) in 2021 but total transactions remain below pre-pandemic levels recorded in 2019, according to the National Property Information Centre (NAPIC).
The year 2021 saw 300,497 property transactions worth RM144.87 billion recorded, up 1.5% and 21.7% y-o-y respectively, NAPIC said in a statement in conjunction with the release of its Property Market Report 2021.
For 2022, NAPIC said the property market environment “remains challenging” but sees momentum to improve on the back of the transition to the endemic phase of Covid-19, with border reopening and the lifting of restrictions expected to further improve domestic economic activities.
Residential overhang rise in 2021
According to NAPIC’s statement, the residential overhang situation saw volume rising 24.7% to 37,000 units worth a total of RM22.79 billion — up 20.5% from the year before.
Citing Rahim & Co’s Sulaiman said “One of the reasons is the buying incentives have not made enough impact, as disposable income levels [remain low] and economic uncertainty persists. This brings forth a problem of completed units rivalling newer incoming units, and the longer a dwelling remains unsold after completion, the less appeal it holds for buyers”
An Uncertain 2022 Outlook
Most industry experts forecast that the 2022 property market will be tough and turbulent owing to a number of factors. Incentives and offers brought upon by Home Ownership Campaign (HOC) have concluded at the end of 2021.
The pandemic also saw Bank Negara lower its Overnight Policy Rate (OPR) to a record low of 1.75%, which brought down the cost of home financing. Nevertheless, with the recovering economy, economists are predicting that interest rates will rise later. The pressure on central banks around the world to increase their interest rates as a tool against inflationary pressures will result in Bank Negara Malaysia to follow suit and to increase our interest rates, especially to prevent a depreciation of the ringgit.
And then there are also the outside factors in play such as the new rules for MM2H (Malaysia My Second Home), which may reduce foreign interest in local properties.
Looking ahead, Rahim & Co expects residential property prices to undergo a correction and attain only moderate growth in the immediate future.
The Economy factor
The recovering economy is the first factor that will help drive the property market. Economic growth in 2022 will result from continued policy support, the expected relaxation of Covid containment measures, and an increase in demand in both the external and domestic sectors.
According to Henry Butcher’s latest annual report on the review and outlook for the Malaysian property market in 2022, the economy’s continued recovery and lower unemployment rate will boost confidence and the residential market in 2022.
High Inflation risk
The Russia-Ukraine war has definitely changed the global economic landscape. In recent months, The Malaysians are feeling the pinch with the continue rise of price of goods and daily needs. Moreover, some two-thirds of our intermediate products are imported. Global supply chain disruptions is also affecting local companies and multinational companies operating in Malaysia.
As building material costs rise, developers will have to accept lower profit margins, and market conditions do not favour raising selling prices to offset the higher costs.
The pandemic
With the re-opening of borders effective 1st April 2022 in line with the government’s plan of transition from the pandemic to endemic phase, more activities are expected to slowly return to normal. However Covid-19 cases are expected to rise and new variants could hit sooner than posing another threat to the recovery of the economy.
Political Instability
The Malaysian has seen 3 Prime Ministers during the 2 years of Covid-19 pandemic as well as the toppling of several state governments in recent months. The political situation in the country will continue to be uncertain until the 15th General Election (GE15) is completed (which could happen later this year). Investors would adopt a more cautious stance holding on property investment until the political situation is firmly resolved.
Reference:
- NAPIC: Property market improved in 2021 but challenges remain (EdgeProp.my / 04 April 2022)
- Brighter outlook for Malaysia’s property market but headwinds remain (The Edge Markets, 26 February 2022)
- 2022 property market overview – the economy and the pandemic (The Sun Daily, 01 March 2022)
- A Challenging 2022 Property Market? Here Are Some Effective Ways to Navigate Malaysian Real Estate in 2022 (Mudah.my, 07 March 2022)
- HENRY BUTCHER: The local real estate market is showing more signs of recovery this year (News Straits Times, 7 February 2022)
- Ukraine invasion and the impact on Malaysian economy (Sinar Daily, 04 March 2022)