Shrinking homes, rising prices

                                                                                                                    CLICK TO ENLARGE

PETALING JAYA: More young property buyers, especially those about to start their own families, may be forced to purchase their first homes in the outskirts of the Klang Valley, such as Rawang and Dengkil, as residential properties in prime city locations suffer from “shrinkflation”.

Shrinkflation refers to the sustained increase in property prices even though new units are smaller than they used to be.

While analysts and industry observers generally welcome Budget 2025’s homeownership measures, the consensus is that more needs to be done because many younger generation workers still find it difficult to buy their first property.

Licensed financial planner Stephen Yong said the supply of affordable housing, particularly in urban areas with manageable commutes, is limited.

ALSO READ: Homes beyond the reach of most M’sians

“Buyers would usually need to save up to 25% of the property’s price to pay for costs like down payment, legal fees, renovations and furnishing – all of which pose a considerable financial burden.

“Young Malaysians also encounter hurdles in securing housing loans due to lower income levels, rising expenses and strict debt service ratio requirements.

“This difficulty is even more pronounced for freelancers and gig economy workers, as banks often impose stricter conditions on applicants without stable, predictable incomes,” said Yong, who is also the executive director of Wealth Vantage Advisory.

The National House Buyers Association (HBA) opined that there is a need to define “affordable housing” to ensure the term is “not abused” by property developers who deem prices of RM500,000 as “affordable”.

ALSO READ: ‘Lock in perks for higher-priced homes’

Its honorary secretary-general Datuk Chang Kim Loong said the government has previously reiterated that affordable housing must meet three criteria: for it to be priced between RM150,000 and RM300,000; must have a minimum built-up of 800sq ft (excluding balcony space) and have at least two bedrooms; and must be located in areas with good public transportation links and amenities.

CLICK TO ENLARGE

“Whatever schemes are introduced will not make houses affordable if prices are not checked and costs (of doing business) are not addressed.

“Let’s face it, owning a house is beyond the reach of most Malaysians. We need to address the root cause and not pander to parties that caused the hike.

“HBA hopes that the current Housing Minister will always put the interest of the rakyat and country first before the interest of housing developers,” said Chang.

Rahim & Co International Sdn Bhd estate agency chief executive officer Siva Shanker said he welcomes Budget 2025 measures to promote homeownership, especially first-time buyers.

“However, the measures announced are not substantial enough,” he said.

ALSO READ: Tax relief timing for first-time home buyers is crucial

Among the measures announced in Budget 2025 was a RM5bil step-up financing scheme introduced under the Housing Credit Guarantee Scheme (SJKP), which offers a lower repayment rate in the first five years of the mortgage term.

SJKP will also guarantee loans for first-time home buyers of up to RM500,000 for homes developed on wakaf land. To support individuals purchasing their first home, Budget 2025 also proposed an individual tax relief on mortgage interest payments.

There is also a tax relief of up to RM7,000 for residential properties valued up to RM500,000, while a relief of up to RM5,000 will be given for residential properties priced between RM500,000 and RM750,000.

This relief can be claimed for three consecutive years of assessment on sale and purchase agreements completed between Jan 1, 2025, and Dec 31, 2027.

Siva said the real problem affecting first-time homebuyers, especially the bottom 40% income earners (B40), is the difficulty in securing a down payment for the housing loan.

“When you apply for a 90% housing loan but the bank only approves 80%, it means you need a down payment of 20% from the house value. Many people don’t have the cash in hand.

“Perhaps the government can consider a policy where banks will provide 100% loans for first-time B40 homebuyers,” he added.

Malaysian Youth Council executive committee member Eow Shiang Yen said Budget 2025’s step-up financing scheme indicates the government’s commitment to easing the financial burden of the youth.

“However, the success of this scheme requires interactions of other relevant components such as improved financial literacy, building passive and secondary incomes, relevant competence development and competitive salaries,” said Eow.“The youth still need to cope with increasing living costs and other expenses. A strict supervision and ongoing enforcement are also required to ensure that initiatives such as People’s Residency Programmes, People’s Housing Projects, and Rumah Mesra Rakyat are not misused.”

Yong concurred with Eow on the need for financial literacy to make homeownership a reality for young Malaysians.

“In addition, incentives like stamp duty reductions, first-time homebuyer grants, and flexible loan structures with extended tenures would make homeownership more accessible,” he said.

Commenting on the proposed tax relief on mortgage interest payments, Chang said it should be given to all existing homeowners with outstanding housing loans, not just first-time buyers.

The three-year tax relief should start from the date of property handover instead of the date of sale and purchase agreement, he said.

“The tax relief on interests should be applied strictly for first-time buyers irrespective of purchasers from housing developers or from the secondary market or sub-sale,” he added.

Source link

Related stories:

Homes beyond the reach of most M’sians

‘Lock in perks for higher-priced homes’

Tax relief timing for first-time home buyers is crucial

Nga: Country on the right track of house ownership 

Housing Market ‘Shrinkflation’: Why Homes Are Getting Smaller—but You’ll Pay About the Same Price

Related posts:

Young adults in developed countries rent, we buy houses for good

Middle class malady

Broader scope of property management

Commissioner Of Buildings (COB) In Malaysia, And Their 6 Main Functions

Weed out the problematic, errant, incompetent officers early

‘Review Strata Management Act’

STRONG PUSH FACTOR FOR PROPERTY MARKET

 

Country’s higher economic growth a feel-good element that is spilling over to the sector

“Inflation levels are benign at about 2% and with the ringgit appreciating against currencies such as the Singapore and Australian dollar, it indicates increased confidence.” Datuk Ho Hon Sang

KUALA LUMPUR: The property market appears to have several strong push factors going for it in the bigger picture, although developers are by and large still cautious despite any broader positivity.

The Real Estate and Housing Developers’ Association of Malaysia’s (Rehda) Property Industry Survey reveals the market is stabilising, amid continued concerns on rising costs on key core cost components such as building materials.

Survey respondents said there was more than a 10% annual increase in the average price for sand, which is used mainly in infrastructure projects, glass and concrete; while costs for steel appear to have declined or tapered off as at June 30.

Unsold units are featured as among the key highlights in the results of this survey whereby half of its respondents reported having unsold completed residential units.

A third of these unsold completed residential units were more than three years old, while about half of them were less than a year old.

A majority or 46% of the survey’s respondents reported that their unsold completed units were priced at RM500,000 and below.

According to survey respondents, the main reasons for this situation were end-financing loan rejection, low demand or interest and bumiputra lots.

The survey, which was done for the first half of 2024 also includes forecasts based on the survey on the market outlook for the second half of this year and the first half of 2025.

It collated responses from 162 out of over 1,500 Rehda members.

According to Rehda president Datuk Ho Hon Sang, the survey only includes a small number of respondents among its larger count of members and does not reflect all launched projects or sales made within the period under review although it can indicate the sentiment on the ground.

“The higher than estimate economic growth thus far gives the country a feel-good factor which spills over to the property market as well.

“Inflation levels are benign at about 2% and with the ringgit appreciating against currencies such as the Singapore and Australian dollar, it indicates increased confidence.

“There are also huge infrastructure projects that are being announced such as the West Coast Expressway which will open up more economic areas,” Ho said at a media briefing yesterday.

“An example is data centres. From 2021 to 2023, there were more than RM76bil of investments into this area, which attracts the established multinational companies.

“This has a very feel-good factor for the property market – as data centres are not just a one-time capital expenditure but provides opportunities during the operations and maintenance period.

“For example, Microsoft has committed to training up to 200,000 talents to maintain DCs,” he added.

Apart from that, there is the stable government and the coming Urban Redevelopment Act that will be focused on the Kuala Lumpur area which will further spur economic activities.

“All these have a part to play in transforming and influencing the sentiment of the people,” said Ho.

Increased demand may also come from increased foreign participation in the property market, although Ho indicated the price threshold is different in the various states and may be too high in some to spur any meaningful foreign buying.

Commenting on the unsold residential units, Ho noted a third of unsold completed bumiputra lots have aged more than three years, which is an issue that the industry needs to address eventually.

“Developers are still treading carefully when it comes to their business operations, despite the improving industry conditions in terms of launches and sales,” he said.

Ho added that this is expected, given the increase in prices for some building materials, which have hit smaller developers harder than larger property development companies.

Rehda also notes that more environmental, social and governance-friendly construction practices such as pre-cast and industrial building systems will increase costs for smaller developers, although it would help to reduce costs for bigger developments.

“For pre-cast panels, the production is centralised and for developments such as high-rises which feature a standard design, it can help to reduce costs on higher volumes with a standard mould.

“For terrace houses with standardised designs, it would be okay but for customised designs it would be difficult for the pre-cast suppliers to do.

“So most developers would still prefer the conventional building style (traditional construction methods) for landed properties.

“But the bigger developers are proceeding with using pre-cast panels even for their landed developments,” Rehda’s deputy-president Datuk Zaini Yusoff told StarBiz.

Zaini said bigger developers usually have their own in house pre-cast manufacturing capabilities.

Commenting on this new construction technology, Ho said it can increase costs for some developers by up to 10% to 15% based on feedback from Rehda’s members.

“This includes transportation costs from the pre-cast plant to the construction site as these costs (diesel) have gone up now and the deployment of skilled labour, since one cannot use normal manual labour to put these together.

“These causes the cost increase,” Ho said.

The survey also indicated that for the next 12 months, respondents look forward to higher optimism for the first half of 2025 compared with the second half of this year.

Source link 

Property market and affordability

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

Growth momentum set to continue

Bright future ahead for Malaysian properties

Is real estate still a viable investment asset?RRe

Uptrend emerges for property sector

 
Investments in Malaysia fuel long-term growth

UOBKH Research maintains an “Overweight” call on the property industry,.

“Property transactions are reaching all-time highs, oversupply is dropping, and investment in the real estate sector is on the rise.”-UOB Kay Hian Research

PETALING JAYA: UOB Kay Hian Research (UOBKH Research) is keeping its optimism on the property sector, despite acknowledging that second quarter (2Q24) earnings results for the companies under its coverage were a mixed bag.

The research house said among the eight firms it reports on, four had results that were in line with its expectations, three fell short, while one exceeded projections.

The research house said: “S P Setia Bhd’s results shortfall was due to a significant impairment on its Battersea projects in Britain, while UEM Sunrise Bhd’s (UEMS) weak results were due to lower-than-expected progressive billings, caused by delays in construction and deliveries of raw materials.”

At the same time, it said IOI Properties Group Bhd (IOIPROP) also reported weaker-than-expected earnings on lower-than-anticipated contributions from China, although Sunway Bhd exceeded expectations, driven by higher progressive billings from both the group’s property and construction segments.

Despite the performances of several companies coming in below forecasts, UOBKH Research said that industry players under its coverage recorded 2Q24 net profit growth of 26% quarter-on-quarter and 60% year-on-year (y-o-y).

Outside its coverage scope, the research house said that both Sime Darby Property Bhd (Simeprop) as well as Eastern & Oriental Bhd exceeded consensus estimates on strong progressive billings.

“Developers are on track to achieve their 2024 sales targets, having reached approximately 50% of their goals so far.

“Lagenda Properties Bhd (Lagenda) and Simeprop led the way with double-digit sales growth for the quarter, as the former’s 2Q24 sales surged 19% y-o-y to Rm300mil, marking the highest quarterly sales in the company’s history,” the research house said.

Simeprop also saw impressive sales growth, with 2Q24 sales increasing by 45% y-o-y, prompting the group to revise its full-year sales target upward to Rm3.5bil from Rm3bil.

For the second half of the year (2H24), UOBKH Research said it is expecting stronger earnings from almost all companies under its coverage, with the exception of S P Setia and IOIPROP. It added that S P Setia’s land sales quantum is expected to be much lower in 2H24.

“Meanwhile, Ioiprop’s first few quarterly results for its financial year ending June 2025 (FY25) may be weak as we will see a jump in interest costs from its IOI Central Boulevard project in Singapore as that becomes fully operational in October this year,” the research house said.

Nonetheless, it believes IOIPROP has the potential to surprise on the upside due to the higher-than-expected launches recently as well as possibility of better-than-anticipated sales of Marina View in Singapore.

Overall, it said excluding land sales gain, sector net profit for 2024 and 2025 are expected to grow by 13% and 20%, respectively, driven by higher progressive billings on higher property sales and launches.

On a separate note, the research house said August share prices for property counters were hit by negative sentiment, driven primarily by the emergence of sinkholes in Kuala Lumpur, which itself led to the suspension of construction approvals in the capital.

UOBKH Research reported that the latest directive now requires planning permission applications for buildings in the city to include a geotechnical study by certified engineers.

“We gather that these geotechnical study rules have been in place since 2022, and are not new regulations.

“Developers in Kuala Lumpur such as Mah Sing Group Bhd also reiterated that they have been following all the guidelines and are in compliance with all the requirements, including the necessary geotechnical studies, hence, they do not anticipate issues with ongoing projects or future launches,” it added.

Maintaining an “Overweight” call on the property industry, UOBKH Research believes a long-term uptrend has emerged in the sector, fuelled by record-high total investments in Malaysia over the past two to three years.

It said property transactions are reaching all-time highs, oversupply is dropping, and investment in the real estate sector is on the rise.

“This growth is supported by several key factors including the expansion of industrial developments, which provides developers with new expansion opportunities and reduces reliance on residential projects, as well as increasing land values driven by the establishment of special economic and financial zones, rising demand for data centres, and new infrastructure projects,” it noted.

Top picks for the sector are IOIPROP, Lagenda and Mah Sing, with target prices of RM3, RM2.32 and RM2.29, respectively.

Source link 

Related posts:

Rating upgrade to spur fund inflows into Malaysia

Promising high-rise residential outlook

 

Upward trend due to the strong cost push elements

Khong: The market is still seeing a significant influx of new high-rise units.

THE high-rise residential property market is showing promising signs of growth, despite the influx of new units and prevailing oversupply situation.

Given the land scarcity in the city and its rising construction costs, Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong says high-rise properties will continue to move upwards due to the strong “cost push” elements.

New builds will be more costly to produce and hence, its higher pricing. Rentals will be affected as it is also a function of the capital values of the new units,” he tells Starbizweek.

However, Khong says demand will continue to increase as more urban migrants seek employment opportunities in urban areas.

“Rentals will continue to see strong demand (as many cannot afford to buy and will continue to rent) as they will still need a place to stay in the Klang Valley.

“We are seeing young professionals, expatriates and small families now favouring high-rise living due to affordability factors plus convenience, security and its amenities.”

Khong adds that retirees are also choosing high-rise properties over landed ones for similar reasons.

“Additionally, there is less physical maintenance required for a smaller place,” he says.

“The market is still seeing a significant influx of new high-rise units, but the challenge lies in balancing new supply against an oversupply situation to avoid negative factors on both capital values and rental yields,” Khong adds.

According to Knight Frank Malaysia in its Real Estate Highlights report for the first half of 2024, the high-end, high-rise residential segment in the Klang Valley is currently experiencing significant growth in market activity.

“This upward trend is highlighted by rising sales volumes and an increase in the number of newly launched projects.

“Over the past six months, there has been a concentration of developments in the KL City Centre, reflecting a shift towards investment portfolios, especially with the introduction of return on investment rental programmes.”

Knight Frank adds that the market’s momentum is further bolstered by government initiatives aligned with the Madani economic framework.

Khong says he expects demand for prime areas to pick up well, such as the KLCC and

Trx-bukit Bintang areas, which caters primarily to high-income earners and foreign expatriates.

“Many properties in the Golden Triangle area have been converted to short-term stay units targeting tourists for lucrative rental returns.”

Khong adds that high-rise projects in well-connected areas are also expected to see stronger value appreciation and higher rental returns, in particular properties near transit-oriented development zones, especially near new MRT and LRT expansion lines.

“Established residential areas like Damansara Heights and Bangsar should also continue to perform into the rest of 2024,” he says.

Meanwhile, down south in Johor, veteran property analyst Samuel Tan says the high-rise residential sector will perform better in the next couple of years, especially those that are easily accessible to the two causeways and near the Johor Baru Singapore Rapid Transit System (RTS).

“Reasonably priced highrise apartments away from the centralised location but within established localities, will perform better moving forward.

“This is because landed residential properties are getting very expensive and beyond reach for most first timers.”

Additionally, Tan says many overhang units that accumulated during the Covid-19 period have been cleared.

“The supply-demand dynamic is not skewed towards the buyer’s market anymore. Having said that, we also noticed that developers are “rushing” in to capture the upturn.

“We opine that it is advisable for developers to read the market carefully and buyers also need to do their homework, before plunging in.”

Knight Frank meanwhile says the highrise residential sector in Johor Baru has seen improvements, marked by the launches of new projects that have attracted significant interest.

“Purchase inquiries have been increasing, particularly for high-rise developments near the RTS link project.

“Moving forward, we expect the projects located near the city centre to maintain their upward trajectory, while others are still experiencing positive effects from the ripple.”

Improving rentals

Khong says rentals have been recovering post Covid-19, especially in areas such as in Bangsar, Mont’kiara, Bandar Sunway and Shah Alam (especially the Glenmarie area).

“Notably, Bangsar and Bandar Sunway have surpassed their pre-covid levels, but we see rental tension with the increasing new completions in Petaling Jaya and Subang Jaya.

“It is a tenant’s market and they are spoilt for choices, given the many new offerings with more modern lifestyle concepts, better locations and more attractive amenities moving forward.”

Khong says KLCC still remains on the recovery path.

“We hope the current relaxation of the Malaysia My Second Home programme will enhance the government’s efforts to move Kuala Lumpur city as a world-class business and entertainment hub, attracting more foreign investors and tourists.”

Khong says there are still strong fundamentals that are driving positive rental performance in high-rise residential properties.

“This is despite higher cost-of-living due to the increased service tax now, diesel subsidy rationalisation and the expected RON95 subsidy changes, as urbanisation trends, strong demographics, population growth and the constant migration of the younger generation to urban areas will support this rental demand.

“Upcoming infrastructure projects such as the MRT and LRT expansions are set to enhance the connectivity and desirability to many of such locations. This continues the strong and positive trend in the rental market moving strongly forward.”

Similarly, Tan says he has witnessed improving rental trends for high-rise properties in Johor.

“We do not have official data for rental transactions. However, we know that rentals have been increasing since the reopening of borders in the second quarter of 2022.

“The increase over the past two years was easily 20% to 25% per annum for serviced apartments in the Johor Baru city centre and Iskandar Puteri area.”

Tan says the demand was mainly from Malaysians working in Singapore initially.

“Subsequently, more Airbnb operators also leased these high-rise units when tourists started streaming in.

“More Singaporeans are also renting in Johor Baru to stretch their dollars, especially those who can work from home.”

Source link 

Related posts:

Property market and affordability

• 

  Property market and affordability

    Affordability goes hand in hand with income. Affordability goes hand in hand with income. THE older wisdom believes that a market cycle ty...