According to MyProperty Data, Malaysia’s largest online property data company under PropertyGuru, investors make up a majority of residential property purchases in the Klang Valley in 2020 at 81.1%, and they are increasingly turning their attention towards subsale properties.
Thor Joe Hock, Managing Director, MyProperty Data shared, “The subsale residential property market in Malaysia has seen steady growth in the last few years, and this upward trend is further accelerated by the effects of the pandemic. There is a rise in overall interest in the secondary market as some property owners are selling their assets at lower prices to maintain liquidity, creating opportunities for investors to acquire them below market value. The Real Property Gains Tax exemption has also driven some investors to cash in their existing assets and make a profit. This is reflected in the spike in the average number of subsale listings tracked on PropertyGuru.com.my, which grew by 21.3% between 2019 to 2021.”
Investors overtook first-time home buyers in number of property transactions
The economic downturn in 2020 has led to a 47.2% drop in total number of residential property transactions in Klang Valley. However, the impact is largely seen among first-time home buyers, which used to comprise 55.5% of total property purchases in the area in 2019 but has since then dropped to 18.9% in 2020. Meanwhile, appetite for residential properties in the area remains strong among investors, with a 36.6% YoY increase in investor activity from 2019 to 2020
This change in trend could potentially be attributed to first-time home buyers being more wary of the current situation, with complications and challenges presented by COVID-19 spurring them to take a wait-and-see approach, as purchasing a home can be a major financial decision for this segment of buyers.
This is further backed by findings in the PropertyGuru’s Consumer Sentiment Study H1 2021, which found that due to the impact of COVID-19 on the economy, employment and income.
The impact of COVID-19 on types of properties purchased
The economic downturn last year has affected both new development and subsale residential property sales in Klang Valley, seeing a YoY drop of 64.9% and 41.1%, respectively. The steeper decline in new development property transactions could be due to delays in new project launches, as construction progress was affected during the first Movement Control Order.
In 2020, the property market in Klang Valley recorded the lowest new development purchase in the last five years, with a 90.6% and 38% YoY decrease in the number of transactions made by first-time home buyers and investors, respectively. On the other hand, the total number of transactions in 2020 for subsale properties was the lowest for first-time home buyers (79.4% YoY decrease), but the highest for investors (9.6% YoY increase), in the same five-year period.
This change in purchase behaviours is more prominent among landed properties. Between 2016 and 2019, the landed property transactions from subsale and new development properties are split at approximately 70% and 30% respectively. This has shifted to 84% and 16% respectively in 2020. Meanwhile, for high-rise property transactions, the split between sub-sale and new development properties have remained consistent at around 80% and 20% respectively across the last five years.
COVID-19 has undoubtedly impacted both the real estate market and property purchase trends in Malaysia last year. For aspiring first-time home buyers who have the capital but are indecisive in taking the leap into home ownership, they will require more enticement from developers and the government alike.
Joe said, “To help spur the industry and to increase home ownership, there need to be greater incentives offered to first-time home buyers – be it attractive rebates from developers or assistance from the government. We are pleased to hear of the government’s recent decision to extend the residential home stamp duty exemption scheme under the Home Ownership Campaign until this year-end, as we believe this will not only help to reduce the burden of home buyers, but it can also help to support the sector’s recovery.”