APPD Market Report Article

Kuala Lumpur

November 29, 2022

Yulia Nikulicheva, Head of Research, Malaysia

0.0%

MYR 3.03

Rents
Rising

High inflation and OPR dampen purchasing demand

  • Purchasing demand has been muted due to weak market sentiment as inflation and the Overnight Policy Rate (OPR) increased for the third time in 2022. This has caused the unsold rate to increase slightly from 3.23% (2Q22) to 3.37% (3Q22).
  • Demand in the rental market showed signs of growth as buyers continued to put their purchasing plans on hold and opted instead for renting as a short-term alternative, while waiting for the economy to stabilise.

High construction costs stifle developers’ activities

  • Three projects, 18 Madge, Hemmon House and Scarletz Suits, were completed in the quarter, adding 744 new units to market stock. Another seven projects, comprising 3,493 units, were initially scheduled to complete in the quarter but have been delayed to 4Q22-1Q23.
  • Despite borders reopening and market activity resuming, development activities are still held back by the persistently high construction cost. This has resulted in no new launches for 3Q22 and delays to future quarters.

Prices face heavy pressure as incoming supply remains large

  • With the weak market sentiment, developers were expected to offer even more attractive discounts to pull in buyers, but rising construction costs have proved to be too high. In an effort to maintain initial selling prices, developers have resorted to absorbing some of the costs instead. Capital values maintained at MYR 952 per sq ft.
  • Rents held up at MYR 2.46 per sq ft per month, driven by rising demand in the rental market, as more opted to put purchasing plans on hold and rent instead, while waiting for economic conditions to stabilise further.

Outlook: Sluggish demand amid uncertain economic conditions

  • Demand from the domestic market is expected to remain weak as inflation and OPR are forecast to continue rising in the near term. Buying demand is also anticipated to come from foreign investors, supported by the weakening ringgit and the newly launched Premium Visa Programme (PVIP), which aims to attract wealthy investors to reside and invest in the country.
  • Capital values are expected to face heavier pressure as demand is likely to fall behind with the influx of new supply in 2023. The unsold rate is forecast to hit a record high of 11.1% by the end of 2023.

Note: Kuala Lumpur Residential refers to Kuala Lumpur's prime residential market.

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