Napic expects recent OPR hike to impact residential property demand

Malaysian property transactions declined in the first quarter of this year, owing to a hike in the overnight policy rate (OPR) to 3% effective May 20, 2022, which has impacted the local property market, particularly residential demand.

Based on the National Property Information Centre’s (Napic) data, more than 89,000 transactions worth RM42.31 billion were recorded in Q1 2023, showing a 5.7 per cent decrease in market activity compared to Q1 2022 but the total transaction value increased slightly by 0.8 per cent.

The decrease in activity in the residential and agricultural property sub-sectors at a rate of 6.6 per cent and 12.5 per cent respectively compared to last year affected the performance of the overall property market.

Nevertheless, the increased activity in the commercial and development land subsectors offset the overall decline. Activity in the commercial land subsector rose by 14.5% in volume and 22.1% in value while the development land subsector saw an increase of 2.8% in volume and 30.4% in value.

According to NAPIC, the Malaysian House Price Index (MHPI) stood at 210.1 points (RM453,365 per unit) in 1Q 2023 with a marginal annual growth of 2.0 per cent, almost similar to the pre-pandemic growth.

It said the growth ranging from 0.4 per cent to 5.8 per cent, which was recorded in all states except Sarawak, has stabilised the overall house price index.

“High Rise Unit Price Index recorded an annual growth of 5.3 per cent, supported by the double digit increase in the Petaling area (Selangor) and island parts (Penang).

“The Terraced House Price Index recorded a growth of 2.3 per cent while the Detached House Price Index and Semi-Detached House Price Index recorded a slight decrease of 2.2 per cent and 0.2 per cent respectively,” it added.

Meanwhile, the centre highlighted that the number of residential overhangs decreased to 26,872 units worth RM18.31 billion in 1Q 2023 as a result of market absorption in all states except Selangor.

The volume and value of residential overhang decreased by 3.2 per cent and 0.5 per cent respectively compared to the fourth quarter of 2022.

The serviced apartment segment also saw a marginal decline in the number and value of overhang units by 3.0 per cent each to 23,267 units valued at RM19.59 billion. 

Affordable housing to remain in high demand

The demand for affordable housing is expected to remain strong, which could drive transaction activity in the sub-RM300,000 price range through Q1 2024.

Trends observed in 2022 included an increase in activity with a higher volume and value of transactions compared to the previous year.

The growth in residential transactions indicated a strong demand for housing, and the reduction in the residential overhang is a robust and positive sign.

Overhang fell by 24.7% in volume and 19.2% in value to 27,746 units worth RM18.41 billion as at Q4 2022.

Overhang properties can put downward pressure on real estate prices and transaction activity. As the market absorbs this unsold supply, we can better balance supply and demand. That supports price growth and further growth in transaction activity.

New launches performed moderately well in 2022, with more than 54,000 units launched and approximately 36% of these finding buyers. WP Kuala Lumpur is the best-performing market for new launches, with 47% of new launches sold. In Johor, 43% of new units were sold, and in Selangor, 27%.

Summary

In 2023, the property market is expected to remain cautiously optimistic owing to the national economy, which is projected to grow by 4.0 per cent to 5.0 per cent this year supported by domestic growth prospects.

Additionally, the outlook of the workforce in the construction sector and the increase in prices of building material prices will also have an impact on supply.

In other words the country’s economic and financial developments are the internal factors that will have an impact on the real estate sector and the sentiment of industry players.