THE residential property market, which saw a stable performance in the first half of this year (1H23), is expected to maintain this trend for the remainder of 2023, in spite of prevailing challenges.

KGV International Property Consultants (M) Sdn Bhd director Samuel Tan says landed residential properties will still continue to “hold” well.

“Depending on towns, those selling well are within the RM300,001 and RM500,000 band. The improved political scene in Malaysia is another plus factor,” he tells StarBizWeek.

Tan believes that the various investment commitments by foreign investors will also help to drive the economy and the property market.

“What is really needed is more engagements with the various stakeholders.

“Issues such as inflation, which is raising the cost of living and doing business, need to be addressed urgently.”

Kenanga Research, meanwhile, says the market has been improving, adding however that challenges still remain.

“We remain cautious on the sector’s outlook, given the weakened consumer sentiment due to high inflation and elevated interest rates.

“That said, a growing focus on affordable units (deemed to be up to RM650,000 by certain developers) may help to quell new housing requirements, given the current headwinds,” it says in a report.

Savills (M) Sdn Bhd group managing director Datuk Paul Khong, meanwhile, is of the opinion that the residential segment is expected to remain challenging.

“This is especially with the continuous hikes in land prices, building materials and labour costs, which are pushing base property prices upwards and creating a cost-push effect.”

Khong says developers are cautiously optimistic about the outlook of the property market.

“Many are planning a lower number of new launches and are carefully focusing on certain geographical areas or property types with attractive sales packages, moving forward.

“Heading towards the end of 2023 and into the holiday months, we expect the market to remain active. It should become a buyer’s market going into 2024.”

Zerin Properties chief executive officer Previn Singhe believes that the residential property market is expected to undergo further stabilisation, supported by economic growth, albeit at a slower rate and promising opportunities for investment inflows.

“As inflationary pressures ease, the prospects for the market are anticipated to improve.

“However, there are lingering concerns regarding the rising construction costs and potential increases in the overnight policy rate, which may impact market conditions.”

Previn also believes that developers will be cautiously optimistic in the medium to long term, owing to strong demand for residences, particularly among first-time home buyers.

“The rental market will see strong growth as an increasing number of property seekers are gravitating to renting due to the higher cost of living.”

Additionally, Previn says land acquisition activities will remain active as developers seek to expand their offerings for the affordable housing market segment.

“An uptick in mergers and acquisitions (M&As) is anticipated within the sector, with established and larger developers strategically pursuing M&A opportunities by acquiring stakes in smaller developer companies possessing development land or ongoing projects in prime locations.”

According to the National Property Information Centre, Malaysia’s real estate market recorded a stable performance in 1H23, with the value of transactions increasing by 1.1% to RM85.37bil from RM84.40bil in 1H22.

Volume of transactions, however, decreased marginally by 2.1% to 184,140 in 1H23, compared with 188,002 in the previous corresponding period.

As expected, the residential property sector continued to drive the market, accounting for 60% of the total transaction volume and nearly 53% of the total transaction value.

Tan says the performance of the market in 1H23 was within expectations.

“The performance last year could be boosted by the pent-up demand that had been building up over the last few years, especially during the pandemic.

“With the recent announcements such as designating Forest City as a Special Financial Zone, the impending announcement on the Special Economic Zone, good progress of the Johor Baru-Singapore Rapid Transit System and double-track electrified rail system, as well as the relatively stable government administration, the property market should perform reasonably well in 2H23.”

Khong says the decline in transaction volume in 1H23 can be attributed to a slowdown in construction activities due to the cautious sentiment among developers.

“This is likely due to the current challenging environment where issues such as high construction and borrowing costs as well as insufficient labour are to be expected.”

Previn says the secondary property market remains popular, with 74.9% of the transactions taking place within this segment.

“The residential segment continues to attract strong demand from first-time home buyers, with residential properties priced RM500,000 and below accounting for 78.8% of residential transactions volume in 1H23.”

Previn adds that the serviced apartment segment, on the other hand, recorded significant improvement in both transaction volume and value in 1H23, which grew by 60.3% and 56.9% year-on-year, respectively.

“Selangor and Kuala Lumpur contributed the highest market share of these transactions. Serviced apartments priced above RM500,000 formed 55% of the total transaction,” he says.

Meanwhile, Kenanga Research points out that loan approval rates have been stable.

“We reckon macro and income conditions could be less worrying as economic recovery is somewhat positive and hence more palatable for the banks’ appetite.

“That said, present readings are still far from the peak of 50% during the industry’s upcycle between 2011 and 2014.”

Kenanga Research says approval rates may continue to remain stable in the mid-40% range, given the lack of visible near-term investment returns from property assets.

“Last year’s debt-to-gross domestic product ratio of 81% in 2022, as opposed to the pre-pandemic high of 88%, may indicate lower confidence in borrowings among consumers, which could linger,” it says.