“Is The Residential Property Market Really Recovering?” Part 2/3
“A Market Rally” or “Dead Cat Bounce?”
“The residential real estate market in Malaysia is headed for a post-pandemic rally over the next 12 months, according to the just released Juwai IQI Malaysia Property Survey and Index Q3 2022.
“We surveyed real estate agents around Malaysia,” said Juwai IQI Co-Founder and Group CEO Kashif Ansari.
“They tell us prices and rents are likely to increase significantly over the next 12 months. In that scenario, people who own their own homes will benefit from the increasing values, while those who rent or are seeking to buy will have to continue to raise their budgets."
Perhaps because of the expected increase in prices, nearly nine out of ten of the surveyed real estate agents also said they believe it is better to buy today than rent.
“This data suggests to me that agents expect renters to face rate increases over the next 12 months and for home prices to correspondingly rise. Those who buy now would be spared from these pressures.
“When you look at who has the biggest opportunity here, you see that slightly more than one-third of Malaysians aged 20 to 39 are renters. That's the highest percentage of renters of any age group.”
Ansari said agents are bullish on the real estate market because they are overwhelmingly optimistic about the economy. Forty-five per cent of agents believe the economy will be stronger during the next six months.“
Source: RETalk Asia 25 July 2022
🤠’s take on the above:
Based on a survey of its real estate agents, Juwai IQI CEO says a recovery is imminent in the next 12 months. Elsewhere, Knight Frank Malaysia also expects prices of residential properties to rise. Ceteris paribus, I expect real estate professionals to be optimistic about the property market. But are the prospects for a broad based market rally really there ?
The Triple Whammy
Buying interest has returned for the affordable landed terrace houses market. But as anecdotal evidence from property auctions of 5* condominiums in KL indicate , sentiment towards the high end property segment is still fragile: Just Google “Lelong KLCC condo “
Foreign property investors from China and Red Dot Island that used to account for the bulk of sales of Branded Residences in the range of RM1,500 to RM3,000 psf are staying away, spooked by the fall in the Ringgit and lacklustre rentals in areas like KLCC that are dependent on a dwindling expat pool of tenants.
Some property developers without deep financial pockets will face strong headwinds due to a “Perfect Storm” in 2023 :
1. rising interest rates (resulting in greater financing costs),
2.higher building materials costs (due to inflationary pressures worldwide) and
3.a drop in housing mortgage demand (leading to fewer buyers for their unsold inventory).
BURSA Malaysia Securities Bhd has just placed Penang based Ivory Properties Group Bhd under the Practice Note No 17 (PN17) category of financially troubled companies. Will there be more developers joining the list of PN17 group of listed companies in 2023?
Will any nascent property market recovery be snuffed out if the economy turns south, ie turn out to be a dead cat bounce? The US looks like it's already in a recession by some yardsticks , e.g. two consecutive quarters of negative GDP growth. See Bloomberg's "Is the US in a recession?”
Should Bolehland follow the US into recession next year, I suspect the high end property market in KL won't see a rally in property transactions prices or rentals. At some recent property auctions of 5* KLCC condominiums there were no buyers turning up at 2nd and 3rd auctions. To me, that suggests there is little buying interest from high end property investors. These investors are waiting for property prices to hit fire sale levels before stepping in to buy.
Will Chinese property investors turn towards Malaysia? In a previous post I looked at the EverGrande crisis in China and it's possible impact on China's economy should the world's most indebted developer be allowed to be liquidated.
#propertyinvestment #auctionproperty #propertyoutlook2023 #realestate #realestateagents #knightfrank #IQIJuwai
