Tong Kooi Ong
In my blog posting in March, “Staying cautious on Malaysian properties”, we cautioned on a challenging property market in 2014 on signs of excess supply and slackened demand that are likely to put pressure on property prices and yield moving forward. This is amplified by the impending GST imposition which will take effect in 2015.
The data from the Property Market Report 2013 substantiated our concern. It reveals a drop in overall transactions volume by 11% year-on-year to 381,130 in 2013. Residential segment is still the key segment, accounting for 65% of the total volume and 47% of the value of transactions in 2013. The national average take-up rate for new launches declined to 45.1% in 2013, which is the lowest take-up rate since 2009. This we believe was mainly due to the credit-tightening measures by the banks.
In terms of supply, Selangor and Johor are the leading states, accounting for 21% and 17% respectively of the total incoming supply in Malaysia.
In 2014, we expect lower residential transaction volumes to continue. Historically and rationally, a fall in volume is a precursor to subsequent lower prices. Developers’ ability to raise or maintain prices will depend largely on the market demand. If demand falls and market conditions persist, price declines may be inevitable due to the competition to sell and to generate cash flow. The ability to defer launches will also be limited in view of the costs implication.
