Overhang and unsold properties, property prices heading towards a crash, oversupply and, the list can go on if we pull out all the skeletons and horror stories from the cabinet but, is it all making sense?
A good rule of thumbs, to avoid been silenced with a “biased content” chop, is to stop listening to all the nonsense going around today and, instead, check numbers and facts.
The Property Playground
The first important clarification relates to the “area of interest” that, in our case, is the urban environment which has been growing consistently for the past 40 years to 81.5% or 26.7 million Malaysians. The urbanization rate is still growing, and recent studies predict an average yearly increase of 1%, or 328,000 rural-to-urban migrants, for the next decade. Considering the 4 member per household data, from the DOSM (Department of Statistics Malaysia) latest reports, this translates into 82,000 new urban households every year!
Urbanization
Urban homeownership, according to the data of the latest census, is at only 74.5% and we can conservatively assume that at least 25% of today’s renters, given the opportunity of acceptable locations and affordable prices, might be turning into first time home buyers. This will contribute, counting 4 members per household as per above mention, with an additional 425,000 households looking for a dream-home to own within the next 10 years or an average of 42,500 per year.
Demographic Growth
Malaysia is still a country with a positive population net grow rate and our demographic pyramid, according to DOSM predictive analysis, shows a healthy and balanced population increase towards 42 million by the year 2050. Translating this into households again, it means that there will be additional 85,000 families of four per year for the next three decades.
All the above adds up to a conservative estimate demand of 209,500 residential properties per year at least till 2035.
Property Supply, Setting the Numbers Right
Supply wise, the average yearly delivery of new dwellings, the numbers are by far below the assumed demand as they stand at less than 120,000 to 140,000 residential units per annum making the dark shadow of a possible oversupply disappearing in a blink. The current oversupply is mostly generated by properties priced above RM1 million, or in not so good locations and, given time and hopefully with the help of a stronger economic growth, it should be slowly “digested” within the next five to six years.
Unfortunately, Malaysia still experiences a substantial shortfall of residential properties, in the range of 500,000 units, which will keep remining such for the next eight to ten years. This, though, is good new for all buying properties for capital gain, demand is consistent as well as shortfall, where will the values move?
Defusing the bubble boosting bomb
We all agree that a bomb needs a fuse to explode and that for a bubble to boost a needle is enough. In property related matters the boosting needle is speculation. Avid property investors start dropping their assets in quantity and the market, suddenly, finds itself flooded with properties at fast falling values. This is the fuse that activates the blast. In our case, as of December 2022, I cannot see the market being flooded with properties at “free falling” values, isn’t it?
Speculators have been very well controlled and managed by a wide range of curbing measures introduced since 2014 by Bank Negara Malaysia and the Malaysian government and, luckily, cannot create havoc in the property market any longer.
Boosting bubble, Where and How I ask?!
Others are the current challenges though; Malaysia is experiencing a grow of urban poverty which causes too many households becoming unable to meet month end. Banks are surprisingly making more and more difficult for first time home buyers to secure a loan. Inflation is boosting the urban cost of living to new heights and uncertainties are frequent visitors of people’s dreamtime.
Conclusion
Given all the above, I’m still very optimistic on the future of the Malaysian property market as I’ve seen developers launching new projects in the correct location with the right design/size and values and getting sold-out statements published within few months from the launching date
Property demand is today mostly generated by the young generations, the 39 years and below, young professionals or partners in the myriad of tech startups that have been growing consistently in the past few years. These buyers are attracted by a branded location such as Damansara, MontKiara or KLCC itself, proximity to LRT station, easy access to highways, modern and trendy design and facilities thought after their needs. Have a look at what Grand Global has prepared for these demanding buyers, I personally recommend a visit to the sale gallery for a testing session, just to understand if the sizes provided fit you well!
2 Responses
leasehold?
Hi there, yes is a leasehold land, 99 years
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