Discover the outlook for Malaysia’s property market in 2024. While developed states thrive, challenges persist in smaller regions. Explore expert insights on sales, rentals, and investment prospects.
PETALING JAYA, 16th Jan 2024 – Anticipated strong performance in selected areas and property market segments in Malaysia for 2024 contrasts with concerns in other regions.
Industry experts predict an improvement in sales, driven by recovering consumer spending and successful government initiatives to attract foreign direct investment (FDIs).
Notably, this positive momentum is expected to be concentrated in the more developed states of Selangor, Penang, Johor, and the federal territory of Kuala Lumpur.
However, smaller and less developed states may face challenges and lag behind in this trajectory.
The Klang Valley is poised to spearhead these positive developments.
According to a study conducted by Juwai IQI, an international real estate property transaction group, the buy-to-rent ratio for 2024 stands at 91.1% for purchases and 8.9% for rentals, signalling robust confidence in the real estate market. Anticipated increases in yields further support this positive outlook.
Kashif Ansari, the Group CEO of Juwai IQI, mentioned that both prices and rental rates are likely to experience a growth of approximately 10%. AmBank Research has conveyed a positive outlook for the upcoming year, projecting an average earnings growth of around 27%.
The bulk of these transactions is expected to occur in Kuala Lumpur and Selangor, while Penang and Johor vie for the second spot. Tang Chee Meng from property management firm Henry Butcher emphasized that the enhanced mobility resulting from major infrastructure projects will draw more individuals to these states, fostering a surge in housing demand.
Analysts predict that Malaysia’s appeal as an investment hub for foreign firms looking to expand in the region will drive growth in the industrial property sector. JLL Malaysia forecasts robust growth in the demand for real estate for data centres in 2024, anticipating a capacity increase from the current 200MW to 750MW.
Jamie Tan, Managing Director of the real estate services company, highlighted that Malaysia remains a relatively minor player in the data centre industry when compared to Singapore and Hong Kong. However, Tan emphasized the substantial usage of data by both individuals and corporations, indicating significant potential demand for future data centre projects in the country.
Residential properties, particularly those with prices below RM500,000, are anticipated to experience sales, primarily in Selangor, Kuala Lumpur, and Penang. Kashif noted that currently, about three out of every five transactions involve residential purchases, with affordable housing being the most popular segment in the market.
According to Kashif, properties priced below RM250,000 and those falling within the RM250,000 to RM500,000 category are in high demand.
Less Favourable Conditions in Smaller and Less Developed States
However, the situation is less optimistic in other regions. In Johor, a substantial overhang of residential property persists, according to Siva Shanker, CEO of Rahim and Co International Property Consultant.
Similar challenges exist in smaller states like Perlis, Melaka, Negeri Sembilan, and less developed states like Kelantan, where lower property sales are expected in 2024.
In fact, Siva pointed out that states along the northern and east coasts are trailing in their sales performances. Analysts also project a less favourable outlook for the commercial segment, even in urban centres such as Kuala Lumpur.
Tang noted that the commercial property segment might face oversaturation in 2024 due to the completion of mega projects like Merdeka 118.
Tan and Tang concurred that, beyond the oversupply of new office space, the weak demand for office buildings aged 10 years and above presents a significant challenge. Siva highlighted an additional oversupply concern in the form of serviced apartments, emphasizing that many were constructed without considering actual market demand.
JLL Malaysia’s data reveals that only 24% of residential properties launched in Kuala Lumpur in 2023 have been sold, with all of them being condominiums and serviced apartments. To address these challenges, there are potential solutions.
Siva suggested that the conversion of Forest City into a special finance zone and the establishment of the Johor-Singapore special economic zone (JSSEZ) are positive steps. In Kuala Lumpur, upgrading older office buildings to meet current tenant requirements could be a strategic move.
Tan and Tang proposed a government initiative to direct foreign direct investments (FDIs) to less developed states as an incentive for urbanization and income level improvement.