Moderate growth for residential

PPC International MD Datuk Siders Sittampalam.

THE residential property market, which has seen steady growth so far this year, is expected to continue its positive trajectory for the remainder of 2024, according to property consultants.

Despite the upbeat outlook, they expect moderate growth in terms of value and volume.

Rahim & Co International Sdn Bhd real estate agency chief executive officer Siva Shanker says the residential property market has been seeing steady growth in the last few years.

“The residential market saw improvements in 2022 and 2023. So far, 2024 has been doing well. However, the growth won’t be as phenomenal as before,” he tells StarBizWeek.

According to the National Property Information Centre (Napic), residential transaction volume rose 22.3% year-on-year to 243,190 units in 2022.

It grew at a smaller pace of 3% in 2023 to 250,586 units.

Residential transaction value, meanwhile, grew 22.6% to RM94.28bil in 2022.

There were 250,586 transactions worth RM100.93bil recorded in 2023, a marginal increase of 3%.

Meanwhile, in the first quarter of 2024 (1Q24), residential transaction value rose 44.7% to RM25.25bil, while transaction volume 60.2% to 62,823 units, according to Napic.

Siva expects the growth to range between 5% and 10% for 2024.

“It may not be in the double-digit, but anything more than 5% is a winning growth.

“Having growth of between 20% and 30% is just not sustainable over the long term.

“It means that the contraction could potentially be just as steep,” he adds.

Siva reiterates that minimal growth is better than zero growth or a contraction.

“You don’t want to grow 30% and then drop 30%, because then you end up losing everything and we don’t want that. What we want to see is slow and steady growth, so that the drop won’t be drastic also.”

Prices holding steady

PPC International Sdn Bhd managing director Datuk Siders Sittampalam says that property prices have remained stable.

“There is a misconception that prices have dipped post-Covid 19, but this is not true.

“In fact, prices to date have picked up since the pandemic,” he says.

According to JLL Malaysia in its 2Q24 Greater Kuala Lumpur Property Market Monitor, the residential market recorded higher average transacted prices during the period under review than the pre-pandemic year in 2019.

The uptrend in prices, which was recorded in both the primary and secondary markets, was due to inflation and rising construction cost and building material prices, according to JLL Malaysia.

Fewer launches

According to Napic, there were 24,208 residential overhang units recorded in 1Q24, which was a 6.2% drop compared with the 25,816 units recorded in 4Q23.

Quarter-on-quarter, the value of residential overhang dropped 6.7% to RM16.49bil in 1Q24 compared with RM17.68bil in 4Q23.

The bulk of the overhang comprised units priced between RM500,000 and RM1mil, which accounted for 29.4% of the total residential overhang.

Siva says the reduction in the residential overhang has been mainly due to a reduction in new launches, rather than a pickup in demand.

“Going forward, the strategy should be reducing the number of residential properties coming into the market, especially for high-rise projects.”

Zerin Properties chief executive officer Previn Singhe says the primary market saw fewer launches in the first half of 2024, mainly due to developers strategically calibrating their inventories to address the surplus of overhang properties.

“Notwithstanding, several prominent developers, particularly those focusing on affordable and mid-range housing segments at strategic locations, reported encouraging sales revenues during the first half of 2024 and are optimistic about achieving their sales targets for 2024.

“This optimism stems from the housing sector’s continued strong demand for affordable homes, driven by first-time homebuyers.”

Additionally, Siva notes that data pertaining to overhang units only comprised properties within the primary market.

“There are thousands of unsold units within the secondary market and the reason for this is because many people bought these units just to flip (to sell at a higher price purely for profit).”

As such, many of these units remain empty for years, says Siva.

“They remain empty not because they can’t find tenants, but because they just want to sell it off for profit.

“Developers also shouldn’t just keep launching, as this only worsens the overhang situation. Do your research and launch in locations with good demand and at affordable prices.”

Positive outlook

Barring unforeseen circumstances like a major economic crisis, industry observers expect a stable and positive outlook for the remainder of 2024.

Siders meanwhile says stable interest rates will bode well for the real estate sector.

“Bank Negara has maintained the Overnight Policy Rate (OPR) at 3% since May 2023 and this jives very well for the market.

“A stable OPR gives confidence to the market,” he says.

With Budget 2025 fast approaching, Siva notes that many developers are hopeful that initiatives such as the Home Ownership Campaign (HOC) will make a comeback.

“Many developers want it back and it is a good initiative. But if it does get reintroduced, perhaps it can be extended to the secondary market, which accounts for more than 80% of real estate transactions,” he says.

Budget 2025 will be tabled on Oct 18. The HOC was introduced in June 2020, during the pandemic, to help spur the property market.

Siders says a reintroduction of the HOC is not necessary as “there is no pressing need for it”.

“The market is doing well, as it is. It is poised for growth this year, but it will be organic growth,” he says.

Previn says the Malaysian residential property market, particularly in the Klang Valley, is poised for a strong finish in 2024.

“The combination of a stable economic environment, supportive government policies and significant infrastructure developments, alongside robust demand across various market segments, will contribute to a positive and dynamic outlook for the remainder of the year.”