A Mismatch Between Demand and Supply

WE may be an aging society, but the fact is Malaysia’s population is made up of mainly the young. According to the Statistics Department, the largest age group in 2015 was those between the ages of 20 and 49 years.

About 14.375 million, or 47%, of the about 30 million Malaysians are from this age group. The second largest group, at 34% or 10.455 million, comprises those between the ages of 0 and 19 years. The retired and aged make up only an estimated 13.4% of the current population. The Malaysian population is, therefore, a youthful one.

With the young forming the bulk of our population, there is and will continue to be high demand for starter homes throughout the country now and in the near future. However, the price and design of many of the residential properties we have in the market today do not meet this market’s demand. The government has set the direction and its push for PR1MA and other schemes for first-time home buyers are in the right direction in support of housing for our youths.

According to Bank Negara’s “Annual Report 2015”, houses priced up to RM165,060 are considered affordable. The monthly median income for Malaysia is RM4,585 and the annual median income is RM55,020. Therefore, the median affordable house price is between RM165,060 and RM242,000. However, only 21% of new housing launches in the country were priced below RM250,000 in 2014. The report also showed data that pointed to an oversupply of higher-end properties priced above RM500,000.

The Bank Negara report noted that the current level of house-building in the affordable housing segment is not sufficient to meet demand and that a substantial increase in the supply of affordable housing is necessary.

It is also rather disturbing that Bank Negara finds that we are short of about 2.5 times the number of houses that are needed to be built annually. Bank Negara suggested that an estimated 202,571 new houses will be required annually between 2016 and 2020 to match the estimated growth in households during this period.

The report also said it is crucial that a holistic plan be implemented to provide sufficient quality housing that is affordable for the low and middle-income households.

A Khazanah Institute report on affordable housing noted that the median house price was 4.4 times the median annual household income in 2014, which points towards a “seriously unaffordable” housing market.

Based on these findings, the industry needs to correct the imbalance in its stock delivery practices. There is a mindset now to build premium homes but this mindset needs to change to deliver quality affordable housing for the youths instead.

Developers should face the reality that a youthful Malaysia cannot afford houses priced above RM300,000, he added.

There is a mismatch of provisions for the population as a majority of the current projects are aimed at an older population, or for those above 50 years. This clearly shows a need for more projects and developments that cater to those under the age of 50, particularly those between 20 and 49 years of age, who are starting families and looking for their own homes.

According to projections by the Statistics Department, the largest age group in the population will still be those between the ages of 20 and 49 years by the year 2040. About 44% of the total population then will be those between 20 and 49 years old, out of a total expected population exceeding 38 million.

This shows that between 2015 and 2040, there is only a slight decrease of 3% for this age group.

There is therefore an urgent need for more affordable housing. There should also be a focus on amenities and infrastructure to support this youthful population as they will be the ones leading and developing the country.

It is time that the property industry shifts its mindset to remain relevant in accordance with the country’s population’s growth and needs.

Foreign Investors Favour Malaysian Property Market, Says Analyst

KUALA LUMPUR: Property investors are positioning themselves to capitalise on renewed confidence in Malaysia's economy despite global volatility, an economist with a Dubai-based property and investment company said.

IQI Group Holdings chief economist/investment strategies Shan Saeed said the country's property market was growing in a very structured manner and would continue to attract investments from European countries, China, Japan and South Korea.

"We advise our clients on the global scale and they are looking at Malaysia's property market from a very favourable perspective.

"The investors consider the economic growth, investment pattern and domestic growth when deciding to invest in a country," he told reporters on the sidelines of the International Business Review Summit 2016 organised by AMG Holding International Sdn Bhd here Friday.

IQI provides advisory services to clients in Kuala Lumpur, Singapore, Hong Kong, London, Melbourne and Middle East.

Shan said for the past four to five years, Malaysia's economic confidence was rest assured, prompting capital inflows into the country.

"More and more people are looking at property because they are still undervalued and investors are looking at it from the global perspective," he said.

On Malaysia's property market outlook, Shan said Kuala Lumpur would become more like Hong Kong in terms of exorbitant property prices.

"However, there is no property bubble in Malaysia so far, but there is a bull run," he said, adding that the property prices are expected to stabilise by 2018-2019.

On Malaysia's gross domestic product (GDP) this year, Shan said it is expected to grow between 4.8 per cent and 5.2 per cent, underpinned by confidence in the economy despite the global challenges.

"Continuous domestic demand and rising consumer spending will support the GDP growth going forward," he said, adding that the current improvement in the ringgit position also reflected Malaysia's economic health.

He projected the local currency to trade between 3.80 and 3.90 against the US dollar this year following rising crude oil prices.

"Last year, people are saying that the ringgit is going to touch between 5.80 and 6.0, but it was not so as at Dec 31, 2015, instead it was traded at 4.20.

"And now we are seeing the local note is still going in the right direction and it is heading towards the target level," he said.

Source: http://english.astroawani.com/business-news/foreign-investors-favour-malaysian-property-market-says-analyst-103420

NAPIC: Despite Slowdown, KL Landed Home Values Continued To Grow In 2015

PETALING JAYA (April 21): The Federal Territory KL’s (KL) property market saw a slight moderation as the market activity and construction sector softened, but prices of landed residential property still recorded strong growth in 2015.

According to the Property Market Report 2015 by National Property Information Centre (Napic), KL recorded 18,574 transactions worth RM23.39 billion in 2015, indicating a decrease of 9.8% in volume and 1.6% in value from a year ago.

The all house price index for KL stood at 277.0 points, rising by 6.4% over 2014 while average house prices rose to RM734,957 (4Q2015) from RM690,541 (4Q2014).

The largest market share is still retained by the residential sub-sector, contributing 74.8% to total transactions, followed by commercial (21.9%), development land (2.1%) and industrial (1.2%).

“Due to limited supply of landed properties, residential properties in prominent and established areas such as BangsarPark, Lucky Garden, Damansara Heights and Desa Park City continued to enjoy capital appreciation,” the report noted.

“A 1-storey terrace in Bangsar Park could have be priced between RM1.13 million to RM1.73 million whilst the 2-storey Zenia units ranged from RM2.11 million to RM2.2 million,” the report added.

However, high-rise properties saw a mixed performance.

The report noted that apartments and condominiums in Bangsar and Cheras, as well as those located along the Mass Rapid Transit (MRT) route, recorded capital appreciations while the Ambassy Business Park and Hampshire Residences located at Jalan Ampang and Kuala Lumpur City Centre respectively saw some downward movements.

Rental yield was also on an upward trend, especially for properties located along the Light Rail Transit (LRT) and Mass Rapid Transit (MRT) route.

“Average rental yields for landed residential units were between 2% to 3.8% while high-rise residential units were between 3% to 7%,” the report noted.

In terms of new launches and overhang units for residential properties in KL, the primary market saw the launching of 14,444 units, a contraction of 12% against 2014.

“Sales performance also moderated at 41.4%, lower than 47% registered last year, with serviced apartments and condominiums forming the bulk of the new launches,” the report highlighted.

Meanwhile, the residential overhang has dropped by 37.3% in volume and 26.8% in value with current overhang units at 651 units worth RM617.23 million.

A similar trend can be seen for unsold units under construction which contracted to 8,523 units, a contraction of 4.7% y-o-y.

However, the unsold units which have not been constructed rose by more than two times to 3,419 units against 933 units recorded last year.

The report noted that KL’s property market as a whole would remain on a positive path backed by ongoing projects and proposed development projects.

Source: http://www.theedgeproperty.com.my/content/napic-despite-slowdown-kl-landed-home-values-continued-grow-2015