Are Investors Really Driving the 2021 Property Market?

Investor trends differed somewhat from First Home Buyer purchases. Image from Pixabay

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Transactions by first-home buyers made up the majority of overall sales in Q1 2021. However, median prices of investor transactions were significantly higher, even compared to previous years.

Overall, transactions were down across the board. The Q1 2021 Property Market Update by PropertyGuru DataSense showed a year-on-year (YoY) drop of 44.7% residential transactions when compared to Q1 2020 due to the impact of the MCO 2.0 in early 2021. REHDA president Datuk Soam Heng Choon noted that sales would have been higher up to February 2021 had it not been for the MCO 2.0.

However, favourable government and developer incentives kept investor interest alive amid a challenging economic climate. The Home Ownership Campaign (HOC), low Overnight Policy Rates (OPR) and reduced loan margins on the purchase of a third property also bolstered investor interest despite a full lockdown.

Hence despite the lower transaction numbers, property investors remains a key demographic in the real estate market. We took a deep look into investor transactions from Q1 2021 and found four characteristics unique to investor purchases.

  1. Region
Caption: Penang sees investor purchases almost matching first home buyers.

Penang had the highest number of transactions by investors compared to the Klang Valley and Johor at 48% with only a marginal difference in the number of transactions of first-home buyers (FHBs) and investors. A possible reason is that investors may be attracted to areas in Penang such as Perai and Seberang Jaya which had healthy price increases and high transaction volumes despite the pandemic, reaching a 7.35% and 11.11% increase respectively in median price in 2020.

In the Klang Valley, 53.09% of purchases were made by FHBs while 46.91% of purchases were made by investors.

In contrast, Johor saw fewer investor purchases this quarter (37.7%) compared to the other two regions with most transactions by FHBs.

  • Transaction Type

While subsale transactions dominated the Q1 market, statistics showed that investors were slightly more inclined to purchase new developments in the Klang Valley (53.2%) when compared to FHBs. Similarly, 53.7% of transactions in Penang for new developments were by investors.

It is likely the HOC played an active role in influencing investors to purchase new developments. REHDA revealed that RM 25.65 billion worth of gross sales were recorded by the HOC up to February 28, 2021 since its reintroduction on June 1, 2020.

  • Property Type
Caption: More investors opted for semi-detached units in Klang Valley and Johor.

A preference for landed property, especially terrace houses, remains evident in the overall transaction data, appealing to both investors and FHBs alike.

However, investors were more willing to buy higher-end property types such as semi-detached houses and serviced apartments. 66.3% of transactions for semi-detached houses in the Klang Valley were made by investors. A similar preference was also seen in Johor where more investors bought semi-detached houses and serviced apartments than FHBs.

It is possible that rather than just embellish an existing investment portfolio, property investors may also have used this time to upgrade to bigger homes. This trend is in line with how overall buyer demand has shifted to larger properties amid the new normal.

  • Median Pricing

Median prices of investor transactions were higher this quarter than they were in the past two years despite the significantly lower number of transactions.

In the Klang Valley, the median purchase prices for investors were around RM567,009. Johor saw fewer transactions overall but still higher median purchase prices at around RM450,000. The median for Penang was at RM350,000. To compare, the median purchase price for investor transactions in Q1 2020 hovered around RM457,000 in the Klang Valley, RM400,000 in Johor and RM300,000 in Penang.

While transactions by FHBs still outnumber investors across all three areas, the data reaffirms that investors have a larger appetite for more expensive properties.

Leveraging data for decision making

While the volume of investor purchases reduced significantly compared to previous quarters, the data does speak volumes – a market of investors continues to exist for higher-end, landed property in high return areas.  

And with any other market, understanding the preferences of buyers is key for any industry player seeking to penetrate the market, especially in real estate. Big data based on real transactions can provide actionable insights valuable to any real estate player, from agents to developers and banks. 

For real estate agents, this information enables them to better understand the target audience for their listings and make appropriate recommendations. Property developers, valuers and financing institutions can leverage on this data to make more informed decisions or adapt products and services to meet investor trends. To discover more market trends and insights into Malaysian property, read the full Q1 2021 Property Market Update by PropertyGuru DataSense here.

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