This article first appeared in The Edge Financial Daily on February 13, 2018

KUALA LUMPUR: Property consulting firm Rahim & Co International Sdn Bhd, which released a market review report yesterday, said the property market is stabilising and prices are no longer dropping.

The report, Rahim & Co’s Property Market Review 2017/2018, noted that transactional activity continued its downtrend, albeit at a slower pace, despite the strong economic growth momentum seen last year.

For the first nine months of 2017, transaction volume fell 4.3% to 229,529 for all property types, versus 239,916 in the same period in 2016, slower than the 11.9% year-on-year decline seen in 2016. Meanwhile, total transaction value rose 7% to RM102.29 billion for the period, rebounding from the declining trend seen since 2015.

“We have seen prices pressured over the past couple of years but it has now stabilised. The market is stabilising and prices are not dropping further. We think the market will be more stable in the years ahead. Moving into 2018, the number of transactions will likely remain flat,” said Rahim & Co executive chairman Tan Sri Abdul Rahim Abdul Rahman.

Rahim was speaking to reporters following the release of the report yesterday. Also present at the briefing were Rahim & Co research director Sulaiman Akhmady Mohd Saheh, director Choy Yue Kwong, and real estate agency director Robert Ang.

The consultancy firm expects another flat year ahead for the Malaysian property market in general, although the outlook differs for different market segments.

For the residential segment, the focus remains on the affordable sector, but competition is expected to escalate as more developers enter the segment.

“Developers must do affordable properties, because if they continue to develop high-end properties amid the lack of demand, they will face financial problems later on. The affordable segment will take the limelight in 2018, as more developers go into the segment,” said Sulaiman.

Sulaiman said products within the RM250,000 to RM500,000 price bracket did well in 2017, and should continue their momentum in 2018, while high-end properties priced above RM1 million have remained flat, with prices correcting 10% over the past 18 to 24 months.

He said the main challenge for the residential sector is the mismatch between growth rates of household income and property prices. 

“In 2014 to 2016, for example, there was a slight improvement in transactions due to higher income of households, which grew at a faster rate than housing prices. But from 2016 to 2017, while income levels were still growing, it was at a slower pace,” he said.

The commercial segment will see stiffer competition in the 18 million to 20 million sq ft in office space, which will be added to the market over the next five years, while the retail segment will continue to see rental pressures.

The consultancy firm does not expect conditions in the commercial sector to improve in the near term, but said the continued pressure on the commercial segment has made developers and building owners more creative and accommodative to new tenancies, like  longer rent-free periods.

“Traditionally, developers may give a three-month or six-month rent-free period, which is the conventional way. In today’s climate, this may not be as effective. The developer has to consider giving a longer rent-free period to incentivise tenants,” said Choy.