Property glut won’t abate anytime soon

PETALING JAYA: Knight Frank Malaysia and PropertyGuru Malaysia both agree that the oversupply issue in the property market will not abate in 2018, however a consumer sentiment survey by the online property portal shows that buyers will react positively to the situation and transact more in the six months.

PropertyGuru Malaysia opined that improved consumer satisfaction may continue going into 2018 as consumers react positively to the oversupply issue in the market, with a greater number of buyers looking to transact in the next six months.

“Our analysis in 2017 shows that the market has been moderating with prices generally declining. However, with the better than expected economic performance, consumers are gaining confidence again. Coupled with the oversupply issue which may see prices drop further in 2018 for certain property types, consumers now are expressing improved satisfaction. This sentiment may hold throughout 2018 barring any unforeseen circumstances,” said PropertyGuru Malaysia’s country manager Sheldon Fernandez.

According to PropertyGuru’s consumer sentiment survey, desire to purchase in the next six months has jumped 5 percentage points in the last six months to 57%, with consumers looking at both primary and secondary properties to optimise their choices.

For Knight Frank Malaysia managing director Sarkunan Subramaniam however, the property market will continue to self-correct as it looks to find its equilibrium despite being weak in the first half (H1) of the year with oversupplied position in the main sub-sectors such as high-end residential, office and retail.

“Amid flagging demand ahead of the upcoming general election, overall market performance is expected to remain lacklustre going into H1 2018.”

In a report titled “Real Estate Highlights H2 2017”, Sarkunan said developers shifted their focus to the middle-income and affordable housing segments to cater to a wider target catchment amid challenges in the high-end market.

For the high-end condominium market in Kuala Lumpur, he noted that the secondary market pricing and rental remained flat during the review period.

Despite the weak market sentiment, there were property launches at higher pricing but with more discounts. Also worth nothing is that more developers are diversifying their target market to other countries such as Singapore, Indonesia, Hong Kong and Taiwan following China’s capital control.

Nonetheless, Sarkunan said the 50% tax exemption on rental income amounting up to RM2,000 a month as announced under Budget 2018 may improve demand for the high-end condominium market.

For the tenant-favoured office market, there is mounting pressure on occupancy and rental levels as the increasing high supply pipeline continue to overshadow low absorption of Kuala Lumpur office space due to the downsizing and consolidation of the oil and gas and its related sector.

Despite the current challenges in the retail industry, Sarkunan opined that the mid- to long-term prospects remain positive as more retailers embrace the concept of “clicks and mortar” amid the e-commerce boom, while owners and mall operators continue to undertake asset enhancement initiatives to reposition their assets in the changing retail landscape.

Recent completion of about 780,000 sq ft of net lettable area for the retail space brings the Klang Valley’s cumulative supply to 57.4 million sq ft per capita, analysed at about 7 sq ft per person, one of the highest in the region.