Property Market Slowdown, Foreclosure Rising

During the launch of Property Market Review 2014/15 by the property consultancy firm, Rahim & Co., property prices in Malaysia are said to be expected to consolidate this year.

A higher transaction numbers were recorded in the first half of 2014, rebeounding after a slowdown in 2013, said Tan Sri Abdul Rahim Abdul Rahman, the executive chairman of the firm.

The first half of 2014 saw a 3.3% growth compared to the same period in 2013, with transaction value of RM82 billion (19.3% increase).

The double-digit increase in value, as opposed to a less than 5% growth in the number of transactions, indicates that average prices are still increasing. The pace of growth would be “slower” in 2015, he said.

Slow Down in Demand

The slower growth and demand for high-rise condominiums has resulted in an oversupply. The current consolidation of completed units is expected to give rise to more foreclosures going forward.

“But strong liquidity will be able to absorb this,” said managing director, Robert Ang.

Property flipping may not be possible. Property owners expected high margins earlier and they may not want to go ahead with the mortgage payments.

The rentals may not be able to cover mortgage payments. This may result in the weaker ones falling on the wayside, said Ang.

However, Malaysians still have an appetite for land, he added.

Although the residential sub-segment is GST-exempt, building materials, labour and machinery are not.

“There will not be more than a 3% to 4% price hike in residential properties, which is still lower than the 6% GST,” Abdul Rahim said.

This increment is not only due to the GST, but also the market’s supply and demand mechanism, he added.

According to studies by Rahim & Co, the least affordable terraced house is in Sabah, with a ratio of 6.2, followed by Penang at 5.9 and Kuala Lumpur at 5.6.

While effective rental rates are expected to continute to decline due to longer rent-free periods, landlord providing renovation costs and rental review clauses which favour tenants.