Is the Property Market in East Malaysia Truly Recovering? 1H 2021 Market Report
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Overall the property market in Malaysia is on its expected recovery path, including the states in East Malaysia, according to the 1H 2021 East Malaysia Region Property Market Report, released by National Property Information Centre (NAPIC).
Upward Trends Across East Malaysia
As it did in the rest of the country, the performance of the property market in the states of Sabah, Sarawak and Labuan showed improvement in the first half of 2021, compared to the first half of 2020.
Although it remained the lowest contributing region, East Malaysia had the largest increase in volume transactions in the country where it increased by 35.4% in 1H 2021, compared to 1H 2020.
A good sign meaning that there was an overall improvement in transactions!
Before the pandemic hit, the property market was reaching all-time highs in 2019. The NAPIC report shows promising data that the market is on the road to recovery. SOURCE: NAPIC
“The region registered 14,071 transactions worth RM5.61 billion, increased by 35.5% and 59.2% in volume and value respectively as compared to H1 2020. Combined these three states formed 10.1% and 9.0% of the national volume and value transactions,” said NAPIC.
All three states also showed similar upward trends in overall property transaction value, where Sabah showed an increase of 64.3%, followed by Sarawak (57.7%) and Labuan (24.2%).
Sarawak dominated the region’s overall property transactions volume and value with 10,258 transactions (72.9%) worth RM3.57 billion (63.7%) followed by Sabah and Labuan.
The "Kucing" Cat art mural (lukiskan graffiti kucing terbesar) at Eco Mall, Petra Jaya, Sarawak. One of Sarawak's most notable launches in the first half of 2021. SOURCE: Facebook @kuchingviralofficial
How is the oversupply situation doing?
The residential sub-sector remains the most dominant sub-sector in all regions. Each state in East Malaysia had double-digit transactional growth in 2021 and was led by Sarawak (49.4%), Labuan (38.2%) and Sabah (34.8%).
However, although the sales performance improved and new launches decreased across the region, the residential property overhang and unsold situation saw mixed movements.
The residential overhang improved in Labuan and Sarawak during the period however the overhang units were up by 64.3% in Sabah compared to H2 2020.
The number of unsold under-construction units reduced by 11.2% in Sabah while it increased 12.0% in Sarawak. The number of unsold not-constructed units increased in both states. There were no new launches in Labuan during the period.
Kota Kinabalu, Sabah, March 2021: The launch of the RM7 Billion project, the Lok Kawi Resort City. The project is currently undergoing site clearance. SOURCE: Bernama
Are houses getting cheaper?
According to the All House Price Index in Q2 2021, the average house price had an annual growth at 3.2% and stood at RM469,423 in Sabah while there was a drop of 1.9% in Sarawak with average house prices at RM475,070.
Rental yield in the residential rental market appeared to be fairly stable with an average gross rental yield between 1.3% and 8.4%.
Other sub-sectors in East Malaysia doing well
The commercial sub-sector recorded a significant increase in all states with the number of transactions rising in Labuan, Sarawak and Sabah by 211.1%, 63.8% and 57.8% respectively. There was a similar upward trend in value as well.
“Shop sub-sector recorded 1,020 transactions worth RM577.64 million in H1 2021, accounting for 72.3% in volume and 58.9% in value of commercial property transactions in the region,” NAPIC said.
Meanwhile, the agricultural land sub-sector saw the most transactions in East Malaysia after the residential sub-sector.
“The review period recorded nine estate land transactions in Sabah and one transaction in Sarawak worth more than RM280 million,” NAPIC reported.
The Pan Borneo Highway, connecting Sabah and Sarawak, has 21 projects currently under construction and is expected to be completed between 2022 and 2023.
Read about Pan Borneo Highway
Is the market heading in the right direction?
The data shown in the NAPIC report showed many positive uptick trends.
A continuation of the gradual recovery is expected due to the various support initiatives that the Malaysian government is implementing to promote stimulation in the property market such as the Home Ownership Campaign that is set to end in December 2021.
As Budget 2022 approaches and wishlists emerge, you can expect to see affordable housing play a large part of the recovery plan, as well as financing facilities to assist mainly the B40 and M40 groups, own their first homes.
Hopefully the overhang issue, especially in Sabah, will ease and developers may produce more affordable, good quality homes in strategic locations. Banks also must be cooperative as they play a crucial role in the road to recovery.
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For the full property market report for the first half of 2021, click here.