Property developers expect home prices to increase in 2023 amid the rising cost of doing business in the country, which climbed by an average of 17% during the first half of 2022.
Meanwhile, MIDF Research noted that loan application statistics for August indicated that demand for real estate continued to be unaffected by the overnight policy rate (OPR) hike.
1) Home prices to increase in 2023 amid rising business cost
Property developers expect home prices to increase next year amid the rising cost of doing business in the country, which climbed by an average of 17% during the first half of 2022.
“The majority of developers have offered some clues as to how much more expensive their new launches’ selling prices would be. It is not a low amount,” Real Estate and Housing Developers’ Association (REHDA) Malaysia President Datuk NK Tong told the New Straits Times.
REHDA’s Property Industry survey showed that 82% of the respondents had indicated that their cash flow had been impacted by the rising business cost.
The main cost factors affecting cash flow in 1H 2022 are land costs, labour expenses, compliance costs and longer approval times.
Looking ahead, the respondents expect construction expenses to increase by an average of 18% in 2H 2022 and beyond, which could in turn affect home prices.
2) Property loan applications up in August despite OPR hike
Loan application statistics for August indicated that demand for real estate continued to be unaffected by the overnight policy rate (OPR) hike, said MIDF Research.
The firm was referring to Bank Negara Malaysia (BNM) data which showed that the total loan amount applied for the acquisition of real estate grew 4.5% month-on-month to RM53.4 billion in August, reported the New Straits Times.
On an annual basis, the number of property loan applications rose 66.1% due to a lower base impact brought about by the lockdown in August 2021.
The total loan amount approved for the purchase of property climbed 2.4% month-on-month and 93% year-on-year to RM23.3 billion in August.
“Overall, the higher approved loans are in line with our expectation of marginal recovery in new property sales for property developers. We also see a loan for the purchase of property in August 2022 to be in line with our expectation of marginal recovery for the sector,” said MIDF Research.
“Nevertheless, we maintain our ‘neutral’ call on the property sector as residential overhang remains elevated in the second quarter of the calendar year 2022,” it added.
3) Developers neutral on property outlook in 1H 2023
Developers in Malaysia remains neutral on the property sector’s outlook in the first half of 2023, said the Real Estate and Housing Developers’ Association Malaysia (REHDA).
This comes as property launches and sales performances both declined in 1H 2022, showed the association’s Property Industry Survey 1H 2022 and Market Outlook for 2H 2022 and 1H 2023.
“The survey, which was conducted before the dissolution of the Parliament on 150 members across Peninsular Malaysia, recorded a decline of 26% or 7,843 units launched in 1H 2022 compared to 10,665 units in 2H 2021, whereas sales performance recorded a decline of 5% for the period,” said REHDA President Datuk NK Tong as quoted by The Malaysian Reserve.
He noted that 64% of the launches were priced from RM500,000 and below.
With this, 52% of the respondents intend to launch projects in 2H 2022, with 66% expecting 50% sales performance or less.
“The forecast for 2H 2022 and 1H 2023 remains neutral, however, respondents are not optimistic about consumer spending power in the coming year,” said Tong.
4) New developer to revive abandoned housing project
Buyers of an abandoned condominium project in Taman Tun Dr Ismail can look forward to living in their new home as a new developer has taken over the project.
The new land owner, Muhibah Sekitar Sdn Bhd has received approval to develop the 1.7ha site along Jalan Sungai Penchala, reported Free Malaysia Today.
Muhibah Sekitar Director Helmi Harunarashid shared that the previous developer had received RM2.4 million worth of deposits from 584 prospective buyers.
When informed that the project would be revived, 150 buyers expressed interest to continue with their acquisition, while another 150 prefer to wait for the final approval.
“We understand and sympathise with their situation and as a gesture of goodwill, we are willing to recognise the amount they paid in deposits if they decide to continue with the purchase of the units, even though it means that we will not receive the RM2.4 million in deposits,” said Muhibah Sekitar.
He added that a team of contractors, consultants and lawyers had been formed to start work on the development, which will feature 1,075 units spread across three blocks.
5) Building materials unit price indices climb 4%-12.7% in September
The Department of Statistics Malaysia (DoSM) revealed that the unit price indices for building materials rose by 4% to 12.7% year-on-year in September.
The unit price index for steel, for instance, increased 8.7% year-on-year, while that for steel and metal sections rose 8.3% year-on-year, reported Bernama.
On a monthly basis, the unit price index for steel declined 2% and 0.9% for steel and metal sections, said the department.
“However, the other building materials remained unchanged such as plywood for all areas in Peninsular Malaysia, Sabah, and Sarawak; and roofing materials for almost all areas in Peninsular Malaysia (except Johor), all areas in Sabah, and Miri, Sarawak,” added DoSM.
6) Roads, railroad projects to bode well for construction, real estate industries
Zerin Properties Founder and Group CEO Previndran Singhe expects Malaysia’s major infrastructure projects, especially those involving roads and railroads, to benefit the construction and real estate sectors.
Notably, of the RM95 billion allocated for development expenditures under Budget 2023, RM16.5 billion were set aside for the transportation sector, reported the New Straits Times.
Meanwhile, Foo Gee Jen, Managing Director at CBRE|WTW Malaysia, believes public transportation and significant infrastructure projects will have the largest influence on the real estate sector.
“Leading up to Budget 2023, there were high expectations and interesting forecasts made by industry leaders. However, the property sector made a relatively neutral appearance as the general economical budgeting steered in a different direction,” he said.
“Despite this unexpecting turn of events, the budget this year brought upon some impactful changes, some of which focused on green technology, mental health, and commute infrastructure. Initiatives as such will put the country far ahead as these are factors that will play a crucial role in developing our people in the long run,” added Foo.
