CBRE|WTW group managing director Tan Ka Leong said capital values for landed properties within the Klang Valley are expected to grow at a moderate pace this year.
KUALA LUMPUR: The recovery in the residential property market is expected to continue in 2023, albeit at a slower pace amid rising borrowing costs and growing inflationary pressure.
CBRE|WTW group managing director Tan Ka Leong said capital values for landed properties within the Klang Valley are expected to grow at a moderate pace this year.
“For 2023, the landed residential sector will continue to record growth of between 3% and 5%. However, we expect the high-rise residential segment to face challenges. We believe that values will be maintained,” he said during a press conference following the launch of CBRE|WTW’s “2023 Malaysia Real Estate Market Outlook” report yesterday.
CBRE|WTW chairman Foo Gee Jen said there is a lot of optimism about the property market, going into 2023.
“Transaction momentum has been building up. Confidence levels have also been improving.
“With the election behind us, we’re fortunate to have more political stability. In terms of initiatives, the new government has been putting the rakyat at heart, with priority on developing infrastructure. This is crucial for nation-building.”
In terms of the country’s overhang situation, Tan is optimistic that levels will reduce this year.
“There has been a drop in incoming supply, as many developers have held back new launches in the last three years. So that will certainly contribute to the reduction in overhang units.”
According to the National Property Information Centre, the residential property sector recorded 64,989 transactions worth RM25.03bil in the third quarter of 2022 (3Q22), compared with 42,620 transactions worth RM17.82bil in the previous corresponding period.
In terms of the level of overhang, there were 29,534 unsold units worth RM19.95bil in the 3Q22, compared with 30,358 units worth RM19.80bil in 3Q21.
On the outlook of the luxury property market, CBRE|WTW director Ungku Mohd Iskandar Ungku Ismail said he does expect to see new projects coming in this year, especially within the KLCC and Mont’ Kiara areas.
“In terms of pricing, it should still be more or less firm, because there has been a correction in pricing over the past two-to-three years.”
Additionally, he said further overnight policy rate (OPR) hikes will impose a challenging sentiment towards the wider market.
“We expect the OPR to revert to pre-pandemic levels of 3% to 3.25% by this year,” Ungku Mohd said.
Bank Negara has been raising interest rates at a gradual pace to maintain a balance between controlling inflation and ensuring steady economic recovery.
Last year, the central bank raised the OPR by 100 basis points cumulatively to 2.75% from the record-low rate of 1.75%.
Foo pointed out that higher OPR levels will impact the B40 group of buyers the most.
“From a real estate perspective, those people within the B40 group would be most impacted by this, even though the loan period can be for 30 to 35 years.
“Assuming they are paying RM1,000, every RM100 is 10%. However, for the rich, every RM100 of RM5,000 is merely 2%. So that (higher OPR) will definitely hit the B40 people harder.”
Still, Foo admits the OPR has to be raised, eventually.
“Of course, we have to do a bit of a balancing act, in that, we want to ensure that foreign direct investments keep flowing into the country. If we’re not maintaining a slightly higher OPR, then the flow of funds would be to the other countries.”
“So a bit of a trade off would be required here. Housing on the lower end would be impacted and we hope the government will take measures to help this segment of the market, either by extending the loan tenure or offering subsidies.”
The reason higher interest rates tend to attract foreign investments is because they increase the demand for and the value of a country’s currency.
Meanwhile, in a statement, Knight Frank Malaysia group managing director Keith Ooi said the performance of the property market will depend on how the country’s economy performs this year.
“In 2022, most of the world came out of intermittent lockdowns and we entered a year of rising interest rates, geopolitical uncertainty, supply chain disruptions and record inflation rates.
“Considering that the Asia-Pacific economy will face significant headwinds in 2023, Malaysia will continue its recovery albeit at a slower pace, amid the shadows of an overcast global economy.”
In the same statement, Knight Frank Malaysia research and consultancy senior executive director Judy Ong noted that the pricing of high-end condominiums in the secondary market trended positively in 2022, due to the normalisation of economic activities, reopening of the country’s international borders and the return of expatriates.
“The overall rental market is expected to remain positive, with new completions featuring upgraded features attracting higher rents than older schemes,” she said.
