PropertyGuru: A leaner year in property sector

0

Source: PropertyGuru Analytics

KUALA LUMPUR: Property owners and sellers are adjusting their asking prices downward amid mixed macroeconomic indicators as the national Home Ownership Campaign (HOC) draws to a close, as highlighted by the PropertyGuru Market Index third quarter of 2019 (3Q19) report.

Sheldon Fernandez

According to PropertyGuru, the overall PropertyGuru Market Index for the country declined 0.9 per cent year-on-year (y-o-y) and 1.2 per cent quarter-on-quarter (q-o-q), underscoring bearish sentiment among industry stakeholders in both the short and long term.

This follows on a brief 0.8 per cent upswing in asking prices from 1Q to 2Q19, on the back of numerous housing initiatives and incentives by the government.

Asking prices in most major Malaysian markets, including Kuala Lumpur, Selangor and Penang, saw similar q-o-q decreases and long-term declines. Johor was an exception, with marginal y-o-y growth of 0.3 per cent and sideways q-o-q movement in 3Q19. With the recent tabling of Budget 2020 and its lack of significant drivers for property, this sideways momentum is likely to continue into 2020.

PropertyGuru said, the growth over the past year is likely attributable to increased demand following Budget 2019’s stamp duty exemptions and other incentives, as well as increased sentiment concurrent with the HOC.

However, the discounts and other promotional measures associated with the campaign might have had a downward impact on asking prices in the long term, it noted.

“Continued increase in supply was seen in 3Q19 at 22 per cent, a positive turn compared to the previous quarters in 2018, demonstrating that sellers evidently want to let go of their properties, but are still adopting a wait-and-see approach,” said PropertyGuru Malaysia Country manager Sheldon Fernandez.

The Kuala Lumpur market saw asking prices declining 0.9 per cent in the third quarter this year, following a brief spike in the second quarter. This comes amid a longer-term downward trend since 1Q15.

“There is still a large portion of mismatched Kuala Lumpur properties in the market, and properties in the affordable range are still widely in demand, especially with a highly desired address like KL. It remains to be seen how Budget 2020’s revised foreign ownership guidelines will impact these mismatched units,” said Fernandez.

As with Penang, the downturn in asking prices this quarter may be attributed to downward pressure on prices due to the HOC. The trend can also be seen as a longer-term adjustment as demand for affordable housing and developer preferences for higher-margin property tiers find equilibrium.

Moving forward, mixed macroeconomic indicators, both internal and external, indicate a neutral outlook for property in the next few quarters. Dampening factors include ongoing US-China tensions, with slowdown effects for countries with high China exposure, such as Malaysia.

In addition, escalating tariffs have hurt global value chains (GVCs) worldwide, with far-reaching consequences for GVC-related economic growth. Internally, the country’s demand-supply mismatch for property in key markets continues, albeit at a slower rate, while Budget 2020’s property provisions have been targeted primarily at first-time purchasers and interim measures for the residential overhang.

“While the ringgit has strengthened following positive undertones in recent US-China trade talks, and interest rate environments in general have improved following rate cuts by Bank Negara Malaysia and the US Federal Reserve, the conclusion of the Home Ownership Campaign, continued application of revised real property gains tax (RPGT) rates and absence of strong driving provisions for property in the recent Budget spell out a leaner year for property ahead,” concluded Fernandez.