The national demand for sub-sale residential property in H1 2020 was only at -2.5% despite COVID-19.
iProperty.com.my has unveiled its bi-annual H1 2020 Property Demand Analytics which provides an overview of subsale property demand using iProperty.com.my’s user visits and property listings data for subsale properties in Malaysia with a particular focus on Kuala Lumpur, Selangor, Penang and Johor.
The analytics was presented by Premendran Pathmanathan, General Manager of Customer Data Solutions at REA Group Asia, during an online video conference. The analytics looks at three property types: terrace, condominiums, and service residences.
Due to the COVID-19 outbreak and the subsequent Movement Control Order (MCO) which brought real estate activities to a halt for more than eight weeks; the overall H1 2020 national property demand declined by -2.5%.
Compared to H1 2019 Portal Demand Analytics, the demand for service residences contracted sharply by -7.2% while demand for condominiums remained negative with user visits and property listings declining for both.
Similarly, median prices and capital growths for these two property types have also gone down in tandem with the COVID-19 outbreak and the mobility restriction caused by the MCO in Q2 2020. Furthermore, the decline is attributed to consumer sentiment over future uncertainties such as loss of income and sudden changes in lifestyle, priorities, and personal circumstances.
In contrast, user visits and property listings for terrace homes grew in H1 2020 with a capital growth of +2.21%, becoming the only property type with a positive capital growth within the same time period. However, property listings growth outpaced user visit growth, resulting in a -3.3% decline in overall demand.
A drop in capital growth across major cities
The analytics also revealed a drop in capital growth figures in the major cities during H1 2020. Kuala Lumpur City Centre saw the biggest decline at -7.07%, followed by Georgetown with -5.42%, Petaling Jaya by -2.59%, Johor Bahru by -1.73%, and Shah Alam by -1.11%.
This trend is expected as properties in prime city areas have premium prices and would be the first to take a hit when an extraordinary event such as the COVID-19 outbreak occurs.
In Kuala Lumpur, the COVID-19 has impacted demands for all building types. Most noticeably, there was a negative demand for terrace houses. This contrasted sharply with H1 2019 when the terrace house came out tops in terms of capital growth and was the only building type to record a positive value growth.
Similarly, condominiums and service residences recorded a significant decline in demand and capital growth. Nevertheless,the overall subsale property demand in the capital city recorded only a marginal decline of -0.3% in H1 2020. Both user visit and property listing numbers for Kuala Lumpur property only dipped slightly below the positive trend line.
Selangor came out of H1 2020 as the only major state with a positive demand of +3.5% and with an overall increase in visits when compared year on year. While the other major cities in Malaysia recorded a negative demand for houses, Selangor state capital, Shah Alam had a demand figure of +7.63% due to its considerably affordable properties on the outskirts of Klang Valley.
In Selangor, housing demands in H1 2020 shifted to smaller cities and suburban areas such as Puncak Alam, Dengkil, Semenyih, and Cyberjaya. This trend is spurred by the search for larger homes which was brought about by the remote working trend which snowballed after the MCO.
Penang saw a minor setback with subsale property demand declining by -6.5% in H1 2020 as the MCO and the closure of both state and international borders severely affected its tourism industry, translating to the lower search or purchasing interest among overseas investors.
Property demand in the northern state recorded a downward trend across all three property types in H1 2020. On the positive side, terrace house prices in the mainland are still lower compared to its island counterpart, which means the capital growth potential of mainland homes could increase over time.
As for Johor, the property market in the state has been sluggish even before the COVID-19 outbreak and it remained subdued in H1 2020. The southern state has the highest property overhang in the country and its narrowing user visits coupled with an influx of listings have pushed the property demand down by -22.8%.
The closure of the Johor-Singapore border during the MCO could have dampened user purchasing sentiment and might also have contributed to the double-digit drop in H1 2020.
Effects of COVID-19 on property market
The effects of the pandemic on the property market, according to REA Group Asia General Manager of Customer Data Solutions Premendran Pathmanathan, is not as dire as what was initially thought.
“When COVID-19 first hit Malaysia, we experienced a reduction in user visits and property listings during the initial stages of MCO. However, user visits have since recovered following the implementation of Conditional Movement Control Order (CMCO) and by the end of the first week of June, organic searches for subsale property listings saw an upward recovery of +41%,” he revealed.
He continued, “With market activities falling sharply as a result of the MCO, the announcement of the Economic Recovery Plan (PENJANA) package could not have come at a better time. The stamp duty exemption under the Home Ownership Campaign (HOC), the relaxation of Real Property Gains Tax (RGPT) for home sellers, and the higher Loan-to-Value (LTV) ratio should help to uplift the property sector in the coming months.”
Commenting on the release of H1 2020 Property Demand Analytics, Premendran said, “Never before has demand-driven data played a bigger role especially in light of the COVID-19 pandemic. Demand-driven data in Malaysia is crucial in policy planning and making evidence-based subsidy decisions.
“For developers they could benefit from the data to strategise on their next project and gauge consumer trends. With these data, we hope all relevant stakeholders would be able to analyse the insights to understand the local market preferences better, which are reflective of the market demand.
“It is our intention that the publication be made available for the benefit of all stakeholders so as to align industry players with market sentiments to facilitate better decision making. Once all parties are aligned, we can hope to revitalise the property sector in Malaysia.”