Tightening supply to curb residential home price drop

Property News/ 26 August 2022 Leave a comment


Residential homes in Malaysia may soon find a floor price due to the 47% reduction in completed dwellings and 9% decline in new planned residential supply, said Juwai IQI.

The international real estate technology group said the property sector will reduce supply enough to limit future price declines.

“As agents, we still see sufficient activity and buyer demand to keep us busy. We have more concern about supply. The pipeline of new supply is shrinking,” its head of Bumiputera segment Muhazrol Muhamad said in a statement today.

“Prices last quarter fell by 2.2%, but we believe the shrinking pipeline will put a floor under future price falls.”

He said prices drop when there are more properties than buyers, and developers are shifting the equation in favour of supply by reducing the flow of new properties onto the market, noting that inflation is probably the number one factor behind developers deciding not to launch new projects.

“Supply is still sufficient today, and there is still some overhang, but the pipeline is reducing, and the overhang is shrinking,” he said.

Muhazrol said dwelling completions are dropping quickly – in the first quarter of 2022, completion plummeted 47% versus the fourth quarter of 2021, from 25,074 to 13,284.

“New planned residential supply has also dropped. Over the past three quarters, planned new supply fell 36% from 26,392 units to 16,774 units.

“That’s a significant change from the previous trend in which new planned supply increased steadily, quarter after quarter. Compared to Q4 2021, new planned supply is down 9%,” he added.

Juwai IQI is also sanguine about the impact of rising interest rates.

“We don’t believe interest rate increases will significantly impact Malaysia.

“Firstly, inflation in Malaysia is lower than in many other countries, so our interest rates don’t have to rise as (high) to get inflation under control.

“Secondly, even though the overnight policy rate has increased slightly to 2.25%, that is still well below the historical average,” Muhazrol said, noting that current rates are very close to historic lows, which will help limit any potential impact on the real estate market.

Source: Bernama

  1. PenangPaBehToh
    August 26th, 2022 at 13:57 | #1

    Oversupply of luxurious overpriced project and undersupply of affordable homes. Simple.

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