Hesitance on market normalisation but buying interest stays ready

• The quarter saw the fourth increment of the Overnight Policy Rate (OPR) by 25 bps to 2.75%. Despite the consecutive hike, this is still below pre-pandemic levels as November 2019 saw OPR recording at 3.00%. A dampening effect was seen from this as the amount of loans applied under the residential property category saw consecutive decrements in September, October, and November 2022.
• Notwithstanding the rising OPR and postponement of new launches, demand remained resilient with the return of foreign buyers and stabilising financial circumstances. While buying demand faced continued pressure, the rental market showed improving confidence in 4Q22. Renting remained preferable as potential buyers were more sensitive to economic shifts, preferring to wait for further stability.

Delays continue, new launches pushed to 2023

• Projects that had earlier been delayed to 4Q22 from the previous quarter, have been further delayed to 1Q23. These include Damansara Fifty6, The Manor, Met 1 Residences, Residensi Solaris Parq and Trinity Paramount. No completions were seen for the quarter, hence no new units were added to the market. Units sold were of projects completed in the previous three quarters of 2022.
• Due to rising construction costs and labour shortages, new launches have been pushed to 2023, with priority given to selling units that were recently completed and those currently under construction.

Rental market sees growth but prices remain under pressure

• Previously elevated costs stabilised in 4Q22 after peaking, but the effects of the high cost overall is still being felt by developers when positioning future launches. Improved buying activity gave confidence to current selling prices, but a large incoming supply will increase competition in prices. Capital values rose by 1.37% q-o-q to MYR 965 per sq ft.
• Rents also improved by 4.87% q-o-q to MYR 2.58 per sq ft per month, driven higher by growing demand in the rental market, as renting presents as a more feasible option while waiting for economic indicators and prices to further stabilise.

Outlook: Pent-up demand stabilises as economic climate normalises

• Demand is expected to moderate down from the pent-up release in 2022, as normalisation pushes pandemic-driven low rates back up. Developers and buyers are expected to readjust plans according to new post-pandemic economic norms. Despite the increases in both rental and capital values in 4Q22, a slight depreciation is expected for 2023 as new units come online, thus keeping the pressure on.
• On the back of the return of foreign interest, the recovery push will likely be relying mostly on the effectiveness of the new Premium Visa Programme (PVIP) and the re-vamped Malaysia My 2nd Home (MM2H) programme to pull potential foreign buyers back in, and re-establish Malaysia’s position as a second home and investment destination of choice within the region.