Soaring rental market - what it means

 

The Malaysian rental market saw significant growth in the second quarter of 2024 (2Q24), with rents rising faster than anticipated, a trend that could have important implications for the property industry.

According to the recently released 2Q24 IQI Malaysia home Rental Index, the average rent reached RM1,995, a 3.9% increase from the previous quarter and 2.9% higher than the same period last year.

“This index by IQI analyses over 70,000 residential rental transactions between 2018 and 2Q24,” said Juwai IQI co-founder and group chief executive officer Kashif Ansari.

“It provides insights into new leases signed each quarter and offers valuable information on current rental market trends for tenants and investors.”

Accelerating growth

One of the key takeaways from the report is that, for the first time in a year, rental growth has accelerated rather than slowed. The current rate of increase suggests the market is on an upward trajectory, largely due to factors such as demand recovery, seasonal shifts and the return of international students.

“Our earlier forecast was that rental rates would climb moderately by 0% to 3%, but the index has already increased by 3.9%, more quickly than expected,” explained Ansari. “We now update our forecast and project that the index will have increased at an annual rate of 5.5% by the 1Q25.”

For the property industry, this is a clear signal that demand for rental properties remains robust, particularly in urban centres like Kuala Lumpur and Selangor. The surge in rents could prompt developers and investors to explore opportunities in both existing properties and new residential developments.

Regional disparities

The report also highlights significant regional disparities, with Kuala Lumpur maintaining higher rental prices than the national average. Rents in the capital are now 44% higher than the country-wide average and 51% above rents in neighbouring Selangor.

“In Kuala Lumpur, rents in the 2Q24 were up 5.7% compared to a year ago,” Ansari noted. “Selangor, by contrast, saw rents climb by 6.2%, but the overall cost is still much more affordable than in Kuala Lumpur.”

For the property industry, this disparity could encourage more development in suburban or neighbouring areas.

As affordability becomes a bigger concern for families and individuals, developers may focus on building in regions like Selangor, where rental prices are lower but demand is increasing.

“The affordability gap between Kuala Lumpur and Selangor may have encouraged some renters to move from the capital to more affordable neighbouring areas,” said Ansari. “The ability to work remotely has probably given further stimulus to this internal migration.”

The Covid Discount

Despite the rise in rents, many tenants are still benefitting from what the report calls the “Covid Discount”. This discount reflects the fact that rents have not yet fully rebounded to their pre-pandemic levels, particularly in high-demand areas like Kuala Lumpur.

“even though the inde climbed in the 2Q24, many renters still enjoy what we call the ‘Covid Discount’,” Ansari explains. “The average Malaysian renter now pays RM499 less in rent, which is a 20% discount from before the pandemic.

“In KL, the Covid discount is even bigger – renters are paying RM1,301 less on average, which is a 31% discount.”

This has significant implications for both renters and investors. While tenants continue to enjoy more affordable rents, the gradual recovery of the rental market means that prices are likely to rise further as economic conditions improve.

“Investors, on the other hand, may see the current market as a buying opportunity, expecting rents to return to pre-pandemic levels in the near future.”

For investors, the Covid Discount may present a buying opportunity, Ansari adds.

“If you anticipate rental income to bounce higher, closer to historic levels, in the future, buying now may enable you to benefit from income growth and capital appreciation.”

2Q24 figures show a 3.9% increase, which is 2.9% higher than the same quarter last year  The projecd annual growth rate is expected to reach 5.5% by the 1Q25

Stable yields

For property investors, the report offers positive news on rental yields, which remained stable across the country at 5.2% during the 2Q24. This stability makes Malaysia an attractive destination for investors seeking consistent returns from rental properties.

“Gross rental yields in Malaysia put the country in the top half of selected Asian countries, making residential investment property in Malaysia regionally competitive,” notes Ansari.

The stability in gross rental yields provides a degree of predictability for investors, allowing them to plan long-term strategies with confidence.

Developers may also see this as an opportunity to focus on regions with strong rental yield growth, such as Subang Jaya, where yields jumped by 0.6% to a new high of 6%.

“The location with the biggest increase in yields is Subang Jaya.

“This suggests a potentially favourable environment for property investors.

“The overall stability in yields benefits the rental market by making outcomes more predictable for both investors and occupants.”

Future growth

Looking ahead, the report suggests that economic growth will play a crucial role in shaping the property market, with rental rates expected to rise further.

The forecasted 5.5% annual increase in rental prices by 1Q25 reflects the broader recovery in Malaysia’s economy, which is likely to bring improvements in employment, disposable incomes and consumer spending.

“The slower recovery in some areas may be due to the economic challenges the country faced during the pandemic era,” Ansari points out.

“Now that Malaysia seems to be moving into a new growth cycle, we may expect to see a recovery in rental rates and further improvements in employment, disposable incomes and consumer spending.”

For the property industry, this presents both opportunities and challenges.

Developers will need to balance affordability concerns with the growing demand for rental properties, while investors will need to stay vigilant for changes in market conditions.

“The market is already showing signs of recovery and investors will focus on regions and property types that they anticipate will grow most quickly,” says Ansari.

With stable rental yields and the potential for rents to rise as the economy strengthens, the outlook for the Malaysian property industry remains positive.

Developers, investors and policymakers will need to adapt to the evolving market dynamics to capitalise on the opportunities ahead. - By JOSEPH WONG josephwong@thestar.com.my

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Property sales hit fresh record RM196.8 bil in 2023, Growth momentum set to continue

(From left): Director General of Valuation and Property Services Department Sr Abdul Razak Yusak, Finance Minister II Datuk Seri Amir Hamzah Azizan and Director of Napic Sr Norhisham Shafie during the launch of the property report. Photo by Mohd Izwan Mohd Nazam/The Edge

KAJANG (March 6): Malaysia’s property transaction value hit RM196.83 billion in 2023 — the highest ever recorded by the National Property Information Centre (Napic).

The figure was a 9.91% year-on-year (y-o-y) rise from the previous all-time high of RM179.07 billion logged in 2022, Napic said in a statement in conjunction with the release of its Property Market Report 2023 on Wednesday (March 6).

As for the number of transactions, it was largely flat at 399,008 in 2023, a 2.54% increase from 389,107 in 2022, with the bulk 62.8% or 250,586 units coming from the residential subsector.

Likewise, the residential sub-sector contributed the majority or 51.3% of 2023’s transaction value at RM100.93 billion, followed by commercial (19.5%), industrial (12.2%), agricultural (9.5%) and development land and others (7.5%).

“This positive growth trend is driven by a higher increase in transaction value in all subsectors, namely residential (up 7.1%), commercial (up 17.5%), industrial (up 13.1%), agriculture (up 4.6%) and development land and others (up 13.8%) compared wit 2022," Napic said.

The Malaysian House Price Index (MHPI) — a measure of Malaysian home prices — stood at 216.5 points (RM467,144 per unit) in 2023 with a moderate annual growth of 3.2%.

“All major states recorded positive annual growth in [MHPI] led by Johor (up 6.2%), Penang (up 3.8%), Selangor (up 2.9%) and Kuala Lumpur (up 1.8%) respectively,” Napic said.

Cautiously optimistic property market in 2024

Napic said that with the national economy expected to expand by 4% to 5% in 2024, the property market’s performance is expected to remain cautiously optimistic.

Second Finance Minister Datuk Seri Amir Hamzah Azizan, who officiated the report’s launch, said that the property sector in 2024 is expected to continue its recovery momentum supported by government initiatives set out in Budget 2024, although the domestic economy is facing global challenges.

Outlining relevant initiatives, Amir Hamzah mentioned the RM2.47 billion allocation for affordable housing development, RM10 billion allocation to the Housing Credit Guarantee Scheme (SKJP), stamp duty exemption for first-time homebuyers who purchase a home valued up to RM500,000, and more relaxed conditions for Malaysia My Second Home (MM2H) programme.

“Accommodative policies, well-executed measures outlined in Budget 2024 and proper implementation of strategies and initiatives under the 12th Malaysia Plan (12MP) are expected to catalyse further growth in the property sector,” Amir Hamzah said.

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The positive growth trend is driven by a higher increase in transaction values in all subsectors.

KAJANG: The Malaysian property market transaction values rose by almost 10% to a record of RM196.83bil in 2023 from the previous year, with its growth momentum expected to continue this year.

The property overhang situation had seen a slight improvement as the numbers continued to decline by 7% and 4% in volume and transaction values, respectively, from 2022.

Moving forward, the Valuation and Property Services Department (VPSD) said the property market performance is expected to remain cautiously optimistic this year. This is predicated on the healthy gross domestic product growth forecast for this year that’s supported by resilient domestic growth prospects.

Accommodative policies, well-executed measures outlined in Budget 2024 and proper implementation of strategies and initiatives under the 12th Malaysia Plan are expected to catalyse further growth in the property sector, the department said.

The number of property transactions last year recorded a positive growth of 2.5% to 399,008 in 2023, compared to 389,107 last year. The statistics were taken from the Property Market Report 2023 published by the National Property Information Centre (Napic) and VPSD, which is a department under the Finance Ministry.

“The performance of the property market is encouraging with transaction values in 2023 having reached a record, which is an increase of 9.9% from 2022.

“The momentum of the property market will continue to be supported through Budget 2024 measures related to affordable housing and first home financing towards generating a stronger economic performance for the year 2024,” said Finance Minister II senator Datuk Seri Amir Hamzah Azizan.

The positive growth trend is driven by a higher increase in transaction values in all subsectors, namely the residential at 7.1%, commercial 17.5%, industrial 13.1%, agriculture 4.6% and development land and others at 13.8%, compared to 2022.

Newly launched residential units also saw an increase of 4.4% to 56,526 units with a better sales performance of 40.4% from 36% in 2022, the department said.

In his speech at the property report launch yesterday, Amir Hamzah also highlighted the reduction in the property overhang.

“The status for the overhang or unsold units have reduced to 26,000 units with a value of RM17.7bil compared with almost 28,000 units valued at RM18.41bil in 2022,” he said.

Amir Hamzah also said there will be an improvement in the requirements for applicants of the Malaysia My Second Home programme to increase its “flexibility.”

“This will encourage more interest into property transactions in the country that will also attract more tourists and foreign investors into the country,” he said.

This move is expected to help increase investments into the financial markets, of which also includes the national property market, he added.

The government’s present efforts to boost the property sector include the exemption of stamp duty on the transfer of documents for the purchase of a person’s first home up to RM500,000, which will be effective until December 2025.

On another matter, the minister also urged all data suppliers to ensure the data provided to Napic were always accurate and correct.

“Please continue the good working relationship with Napic and the VPSD as the data supplied has a big impact in the future formulation of government policies for the property market.

“I also ask all the others involved, especially the developers, planners or agencies that approve development plans to continue to refer to the data that is being published by Napic, which is accessible through a dedicated portal,” Amir Hamzah said.

Meanwhile, the report said the Malaysian House Price Index stood at 216.5 points or RM467,144 per unit in 2023, with a moderate annual growth of 3.2%.

All major states recorded positive annual growth, led by Johor at 6.2%, Penang at 3.8%, Selangor 2.9% and Kuala Lumpur at 1.8%, the report said.

Meanwhile the performance of shopping complexes witnessed moderate growth in 2023, as the occupancy rate increased slightly to 77.4%.

The available space reduced to four million sq metres, while the availability rate decreased to 22.6%, it said.

Commenting on the property overhang situation, Rahim & Co International Sdn Bhd real estate agency chief executive officer Siva Shanker said he expects the overhang will go down further this year as the market stabilises and improves.

“The biggest cause of overhang units is mainly due to oversupply.”

“A mismatch in location, pricing and developers not meeting the buyer’s demands” are causes of overhang and unsold residential units,” he added.

According to the property market report, the states with the highest rates of residential overhang and unsold units last year were Johor, Kuala Lumpur and Selangor respectively.

Meanwhile, Malaysian Institute of Estate Agents president Tan Kian Aun said the positive reduction in the overhang is a good sign, which shows the vibrancy of the market to be able to absorb the outstanding units in the market.

Tan said the Home Ownership Campaign (HOC) last year showed good progress in the overhang statistics.

“Hopefully the government can consider extending the HOC to further reduce the overhang situation,” Tan told StarBiz.

When asked on the property market’s outlook, Siva said the days of phenomenal growth in the property market are over and he expects a slight growth in the property market for 2024.

Siva noted that “organic growth is a good thing.

“We want a market that is stable and sustainable in the long run as it will not fluctuate with unpredictable highs and lows.”

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WITH DRAGON COMES FIRE, SELLING AND BUYING PROPERTY IN A PERIOD OF CHANGE

 

Selling and buying property in a period of change 

Selling and buying property in a period of change 

As the economy continues its slow recovery, Feng Shui practitioners are embracing the dragon when it comes to the property outlook in the coming year. 

“For followers of Feng Shui, the anticipation of Period Nine‘s arrival has held a mystical allure, brimming with excitement and adventure. Finally, it is here yet there is fear and thoughts among the Feng Shui enthusiasts; particularly concerning its effects on individuals,” Feng Shui master Joe Choo said.

She pointed out that understanding the essence of Period Nine allows individuals to tap into its benefits with less worry and adapt to potential changes more effectively.

Period Nine spans from 2024 to 2043, Choo explained. It is a segment within Feng Shui that holds influence on energy shift patterns. The period is characterised by the fire element, symbolising expansion, transformation and passion. 

“During this period, it is expected to usher in an emphasis on innovation, growth and breakthrough across various aspects of life, including technology, culture and social structures.  Aligning spaces and activities with the energies of period 9 is believed to amplify opportunities and foster progress,” she said.

According to Choo, period 9 is associated with Li Gua (fire), and as such its location aligns with the South. This positioning indicates a more favourable economic trend in the southern geographical region, poised for significant development during Period 9. 

“For individuals seeking to tap into this energy, adherence to basic Feng Shui principles might suffice instead of relocating homes,” Choo pointed out.

From the perspective of property ownership, there are two groups of buyers; homeowners and investors. Their Feng Shui differs depending on their needs.

“Homeowners are advised to select properties with ideal landform which is Feng Shui compliant, aligning main entrances that is commensurate with the year of birth of the eldest earning male of the family,” Choo said.

“Kitchen and master bedroom should be in the ideal sectors based on the year of birth of the mistress of the house, then the rooms for other occupants should be based on their year of birth,” she added.

She pointed out that investors, on the other hand, are encouraged to consider properties in the southern regions of various areas, and anticipate extraordinary economic performance in the next two decades. For example, the southern region of Penang Region is Bayan Lepas, Batu Maung, Teluk Kumbar and nearby pockets. In Peninsular Malaysia, eyes should turn to Johor.  

“For business owners to have a prosperous year, you may apply 2024’s auspicious colours in offices or shops that attract positive events. Additionally, you may place living plants if the entrances of offices or shops are in the Southeast, which is the governing planet… to sail through the year smoothly,” Choo said.

“In terms of Feng Shui, each sector has a wealth area and you may place living plants, water features or crystals at the general area of the office or shop to further enhance the business,” she added.

To do this, business owners should identify the main entrance of their place of business, before they identify its wealth sector from the table. Turn the general area of the business into a square shape before standing at the centre of the space with a compass to identify the main entrance and wealth area.

Main entrances and their wealth sectors

Main Entrance	Wealth Area	Crystals
North	Southeast(127.5° - 142.5°)	White/Green Phantom
Northeast	Southwest(217.5° - 232.5°)	Citrine/Amethysts
East	South(187.5° - 202.5°)	Rose Quartz
Southeast	North(7.5° - 22.5°)	White
South	East(97.5° - 112.5°)	White/Green Phantom
Southwest	Northeast(37.5° - 52.5°)	Citrine/Amethysts
West	Northwest(307.5° - 322.5°)	Amethysts
Northwest	West(277.5° - 292.5°)	Amethysts

Source: Joe Choo

If you are planning to buy a property in 2024, it is beneficial to consider Feng Shui factors in order to harness the positive energy while living there, Choo pointed out.

“It is simply observing the landforms, for example, avoid having rivers, seas, ponds or big monsoon drains at the back of the house,” she said.

The decision to buy a property is ultimately based on need and financial means, Feng Shui master Stephen Chin added.

He agreed that as with Feng Shui principles, one should first consider the terrain surrounding the site. Alongside water bodies, he noted that one should consider the mountains, hills, roads and highways. 

“The most basic rule of thumb is to choose a property that has a higher back and a lower front. This applies to both high-rises and landed property. I co-wrote a series of articles some time ago with Professor Master David Koh that covered the Klang Valley and explained this principle of landform Feng Shui,” Chin said.

Once the area and orientation of the property are shortlisted, Chin explained that homeowners need to ensure that the main entrance to the property is compatible with the master of the house. 

“It is based on the male because it is Yang energy being introduced into the house. To determine this, calculate the Gua or Kua (personal energy) of each occupant - there are plenty of free online Gua calculators out there, so I'm not going to give out any formula!” he said.

From the Gua, one can determine if they are a West or East group person. All West group people have Northwest, West, Southwest and Northeast as their good sectors. North, East, Southeast and South are good for East group people.

“To determine the door's location, stand in the centre of the house with a compass and after aligning the needle, look and see where the main door is located. That needs to be in the good sector of the master of the house. The kitchen and master bedroom should be in the good sector of the lady of the house. The other bedrooms should be matched to the respective occupants,” Chin said.

However, he pointed out that there are a few other things to consider, and one should engage a qualified consultant for ease of mind. 

Choo added that homebuyers are also encouraged to avoid properties which have a T-junction, convex of the road or a higher land mass in front of the house, such as hospitals, shopping malls, schools, high-tension cable and others. 

Knowing the sector of governing planets and Three-Killers of 2024, it is advisable to avoid buying the property having the main entrance located in the South and the Southeast.  

“It may be difficult for buyers who are living in condominiums or apartments because there is only one entrance, so you may place a pot of living at the sector mentioned above to prevent negative events from taking place,” Choo added.

Landed properties with two entrances offer more flexibility, allowing buyers to choose an entrance away from the southeast or south to avoid potential issues.

“After studying the external factors, matching the year of birth of the occupants with the main entrance, kitchen, bedrooms and others is very important to create harmonious energy,” Choo said.

The eye of the beholder

When asked how homeowners should decorate their homes this year, Chin pointed out that they should decorate it any way they wish. “If you want to create a festive mood, go big!” he exclaimed.

While he noted that interior design was not strictly related to Feng Shui, the Chinese are big on symbolism, therefore it's natural to decorate the house with auspicious objects. 

He pointed to anything that symbolises good fortune, wealth, prosperity, longevity, productivity and creativity, as many of these came from Chinese myths and legends. Some symbols are newer inventions, such as the money ship, or the cat with a waving paw.

Chin noted that the cat was the Maneki-Neko from Japanese folklore, with several versions of the story. 

“According to our calculations, the dominant element in 2024 is Yang Fire. Hence, the auspicious colours for the year are light red, light brown or yellow, and light green. These are, respectively, representative of the elements of Fire, Earth and Wood,” he said.

Homeowners can decorate their house or give it a splash of new paint using these colours. However, Chin pointed out that the mileage may vary. 

“Every person has his or her own unique set of colour requirements based on the life profile, also known as the eight Character Stem-Root or Bazi. If your colour requirements match these colours, then they are especially good for you. If not, they may not be as good or may even cause some bumps along the road ahead,” he said.

He noted that it would likely be a good year for the property market as the element of Fire produces Earth. 

“There should be an uptick in earth-related industries which include real estate development and management, construction, civil engineering, and agriculture. The year 2024 is also likely to see a spurt of economic growth and development,” he said.

“However, this is likely to be temporary. One should make hay while the sun shines, but must not overcommit,” he added.

Tips to sell property

In the dynamic and competitive property market, selling can be challenging. For the Year of the Dragon, Feng Shui master Joe Choo offers a few tips for home sellers to expedite the process.

“Applying auspicious colours of 2024 to attract potential buyers to walk into the property. The auspicious colours of 2024 are light red, pink, orange, yellow, green and turquoise green.  You don’t need to repaint the property with such colours, you may apply them on the curtain, carpet or rugs, decorative items and others to enhance the luck,” she pointed out.

According to Feng Shui principles, the governing planet in 2024 is the Southeast sector and the Three-Killers is in the South. 

Choo pointed out that if a property has its main entrance in either the Southeast or South sector, it is advisable to place living plants in the living hall and kitchen to improve the luck of selling the property. 

If the property has a Southeast-facing main entrance, owners are encouraged to place living plants in the West sector, from 262.5° to 277.5°. If the property has a South-facing main entrance, owners are encouraged to place living plants in the Southwest sector, from 202.5° to 217.5°. 

“To find out the position of the plants for the living hall and kitchen, you may square up the place and stand at the centre with a compass to identify the sector mentioned above,” Choo said.

While more could be done to enhance the selling potential of a property, Choo noted that it would involve a much more complicated process. The tips she offered were simple and cost-effective.

Some of its principles could be compared to architectural principles, feng shui master Joe Choo said.

“Decorate it any way you wish!” Chin said.

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Chermaine Poo, a chartered accountant by profession, was trained in corporate finance. A former beauty queen, she has since gained popularity as an actress, TV host, commercial talent and emcee. If you have any questions on money matters, send her an email at info@chermainepoo.com or follow her on www.chermainepoo.com, www.facebook.com/chermainepoo and www.twitter.com/chermainepoo.

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