Part 2 Vision 20/20: PropertyGuru Market Outlook
Price trends and projections for 2020
Perhaps the clearest indicator of market sentiment is seen in pricing movements moving into 2020. According to the PropertyGuru Market Index (PMI) Q3 2019, asking prices for properties across the board declined in three out of four major markets in Malaysia, namely Kuala Lumpur, Selangor and Penang.
Overall, prices in Malaysia declined 0.9% YoY in the third quarter, with Penang leading the contraction with a 1.5% quarter-on-quarter (QoQ) decrease in its PMI from 94.8 to 93.4 in Q3 2019. Johor was the only domestic market which exhibited no decrease in its index; however, it also failed to showcase growth, with a static PMI of 98.5 in the third quarter.
“With the exception of Johor, these downticks in asking prices are representative of downward movements in longer-term trendlines across key markets since 2015. While asking prices aren’t necessarily interchangeable with transaction prices, they serve as benchmarks for seller sentiment, and as such, point towards moderate prospects at best for 2020,” says Fernandez.
Industry analysts attribute falling prices to adjustments on the part of developers to clear unsold stock and ease cash flow, along with downward pressure from the HOC. Buyers with sufficient leverage can take advantage of the current market to expand their portfolios.
Johor, for example, is an attractive destination for investment, with the caveat that prices there have seen marked volatility in recent years due to supply and policy shocks. With this in mind, thorough consideration of existing property types and incoming demand in the area is necessary, before venturing into the market.
Further north, property seekers in markets such as Kuala Lumpur and Selangor can hedge their bets, by examining purchasing sentiment. According to the PropertyGuru Consumer Sentiment Survey H1 2019, Malaysians are increasingly open to purchases in the secondary property market.
This is attributed to locational preferences, with younger home seekers prioritising older projects close to established urban centres, instead of new launches further afield. As such, mature satellite townships like Petaling Jaya, Subang Jaya, Damansara, Shah Alam and Cheras offer better prospects for investors, though affordability will remain a concern for home seekers.
Macroeconomic factors and the road ahead
Mixed macroeconomic indicators also point towards a lacklustre year ahead for property. The US Federal Reserve cut interest rates three times this year, with BNM following suit in May and analysts projecting another potential cut mid-2020. These moves have the effect of creating positive interest rate environments at home, and abroad.
This is conducive to home purchases in the short term, with prospects for capital appreciation in the long run, as cheaper loans drive property prices up. In addition, an influx of interest from regional purchasers may cause an upswing in sentiment for the near future, driven by unrest in other markets such as Hong Kong as well as relaxed foreign ownership guidelines laid out in Budget 2020.
However, these positive factors are balanced by ongoing US-China trade tensions, and their consequences for global economic expansion. In particular, slowing growth in China and escalating trade tariffs may dampen global value chains (GVCs), with spillover effects for markets with high exposure, such as Malaysia.
The Ringgit remains volatile as well to date, trading at an average of RM4.18 to the US dollar as of 4 December with a target of RM4.20 to the dollar by end-2019, according to Kenanga Research.
This volatility, along with sociopolitical uncertainty as the euphoria of Malaysia’s 14th general election fades against a backdrop of increasing dissatisfaction, would have a negative impact on investor appetites – again, with the exception of Johor, which has seen optimal investment numbers to date.
“Moving forward, we anticipate proptech and fintech to play larger roles as international trends find their way to local shores and industry stakeholders seek to differentiate themselves in a heated market. Deloitte, for example, has reported in its 2020 Commercial Real Estate Outlook that it’s no longer about ‘location, location, location,’ but ‘location, experience and analytics,’” says Fernandez.
“Accordingly, PropertyGuru has leveraged on its established track record as the region’s leading proptech player to introduce innovations such as PropertyGuru FastKey, PropertyGuru Lens and Listing Performance Insights. These solutions utilise augmented reality and artificial intelligence to enhance the property journey for home seekers and agents alike, cementing PropertyGuru’s status as a proptech leader into 2020.”