Navigating the Malaysian property market can be daunting affair, especially for those just starting out. We list 8 property trends that every investor should watch out for in 2017.
By Khalil Adis
The property market outlook for next year is daunting with a general slowdown expected across all the property markets. From residential to commercial, experts at the recently concluded PropertyGuru 2017 Property Outlook Forum echoed similar sentiment.
“Based on the combined data from the PropertyGuru Property Price Index and official statistics, 2017 is expected to be another slow year for the property market. With the completion of many new developments flooding the market in 2017, there is likely to be a drop in selling price due to the lack of demand; and some may be motivated to move their units quickly due to their lack of holding power,” said Sheldon Fernandez, country manager of PropertyGuru Malaysia.
Indeed, the property market in Malaysia faces various challenges such as loan rejection by banks, rising costs of living and high unemployment rate among fresh graduates due mainly to their lack of proficiency in the English language.
In the first case, the loan rejections rate in Malaysia stands at around 40 per cent arising mainly due to non-payment of PTPTN (the National Higher Education Fund Corporation) and credit card loans.
In the second case, cost of basic good and necessities in Malaysia have gone up.
Data from the Statistics Department showed that the country’s consumer price index increased 1.4 per cent in October year-on-year.
This is slightly slower than the previous month's pace.
Government data also showed that there were increase in prices for food, alcoholic and non-alcoholic beverages, tobacco and housing.
Finally, according to the Malaysian Employers Federation (MEF), unemployment among fresh graduates as of February 2016 stands at around 200, 000.
This does not include those who have just completed their diplomas, certificate programmes and Sijil Pelajaran Malaysia (SPM).
Collectively, these factors have had a huge impact on the property sector.
Despite the bleak outlook, not all is gloom and doom in the Malaysian property market.
In fact, there are still pocket of opportunities to be sought after by savvy investors.
Here, we list down our top ten property trends to watch out for in 2017.
Trend 1: Below market value homes
One man’s loss is another man’s gain.
With the sluggish economy, rising cost of living and tighter bank guidelines, home repossessions are on the rise.
While there is no official data avialable, agents specialising in below market value (BMV) properties are enjoying brisk business as the supply of such homes come on stream.
This presents a very good buying opportunity for the cash rich buyers as below market value homes come under the hammer.
BMV properties are typically those in the low-cost and medium cost segments
From an investment point of view, buying such properties makes sense as you can buy multiple of distressed assets equivalent to buying one from the primary or resale market.
Due to the lower acquisition costs, your rental yield is higher which ensures you can cover your mortgage (if you are taking a loan) or positive cash flow if you are buying it in cash.
However, due diligence is important so hire a good solicitor and agent to help you buy BMV properties.
Be prepared to cough up extra monies for unpaid maintenance fees, utility bills and quit rent (cukai pintu)
Trend 2: Transit oriented development
I had covered this extensively from my recent article on Propwall.
For more information, please click here
Trend 3: Hotel suites
The shringgit (shrinking ringgit), as what my Malaysian friends call it, does not necessarily spell bad new for the Malaysian economy.
In fact, the falling ringgit has helped to boost tourism arrivals and spendings, especially from my fellow countrymen in Singapore.
One product you may want to look into is hotel suites.
Good markets to focus on include Melaka, Iskandar Malaysia, Kuala Lumpur and Penang.
Make sure the hotel suites have a proper management arm and are located close to places of attractions and shopping centres.
Trend 4: Retail units
Retail units are closely intertwined with the shringgit and hotel suites as tourists flock to Malaysia as the get more bang for their bucks.
When investing in retail units, make sure you go for reputable developers with a property management arm.
The best development to go for are mixed-use development comprising residences, hotels and retail.
This ensures maximum human traffic patronising your stores.
Again, the good markets to focus on are similar to the one I mentioned above under hotel suites.
Trend 5: Smart and connected liveable townships
Malaysian Gen Ys are a discerning lot and they demand a lot more than just a roof over their heads.
As such, smart and connected (and by that, we mean Wifi) liveable townships are the way to go.
Developers also need to come up with more creative ways to differentiate and add value to their developments by creating a vibrant community.
For example, in 2014, UMLand’s Taman Seri Austin became the first urban community to be selected for the Smart and HealthyCity and Community Programme by Iskandar Regional Development Authority (IRDA).
Taman Seri Austin features cycling lanes, pedestrian pathways, and two recreation parks.
Another example is Albury @ Mahkota Hills which features Gen Y friendly facilities like a gym, clubhouse and park connectors.
The development recently hosted a wedding over the weekend at its clubhouse which creates a sense of belonging and camaraderie among its residents.
Trend 6: Short term stays
Airbnb and student accommodations are in demand due to the shringgit and lack of suitable hostels respectively.
When looking at Airbnb, the ideal size would be at least 500 sq ft with a myriad of facilities like cooking, washing machines, microwave oven and so on.
For this concept to work, your property must be located close to tourism attractions like Bukit Bintang, Georgetown and JB Sentral.
One Singaporean friend of mine earns RM10, 000 a month just by renting out his loft unit located within 8 minutes walk from Bukit Bintang MRT station.
Do bear in mind thought that not all management committee in condominiums approve of such short-stay rentals.
Trend 7: Flexible work spaces
Malaysian Gen Ys are an entrepreneurial lot.
Thanks to government mooted agencies like Cradle Fund and Magix, the start-up culture here is alive and kicking.
Some of the most notable Malaysian start-ups include Kaodim and iFlix.
With this trend in mind, flexible work spaces have become ubiquitous.
Generally referred to as “hot-desking”, this trend is especially suited for those just starting out, are cash-sensitive and require computer access with printing and scanning facilities.
In Singapore, hot-desking has become such a brisk business.
If you have a spare office space, why not convert some of your area for hot-desking activities and help fellow entrepreneurs?
You can rent it to on a monthly basis on a per head basis.
Trend 8: Resale homes
If you need a home urgently, a resale unit is the way to go as they are priced significantly cheaper, at around 30 per cent lower, compared than new launches.
This is due to the massive supply in the market that has contributed to a glut in the market, resulting in softening property prices.
This has made it a buyers market.
Be prepared though to have extra cash in hand as you will need to pay a deposit, legals fees and other costs.
The great thing is this - sellers are more willing to negotiate with you.
As such, if you have difficulties in your 10 per cent deposit, you can negotiate your payment terms with the landlord.
Here’s wishing you a prosperous 2017 ahead!
An independent analysis from yours truly