KUALA LUMPUR (April 27): Thousands of incoming high-rise units this year could exacerbate the residential property glut, offering no encouraging signs of an upturn this year, says property consulting firm Nawawi Tie Leung.

According to the firm, the situation is also not helped by the rising cost of living in Malaysia, causing a mismatch between asking prices and income of prospective buyers.

Condominiums priced above RM500,000, especially, contributed significantly to the number of unsold units in the market, while demand for high-end homes was further curbed due to changes in stamp duty pressure on prices, said Nawawi Tie Leung.

“With more than 6,000 units of high-end condominiums slated for completion throughout 2018, this significant incoming supply will bring more challenges and is likely to contribute to a larger inventory of unsold residential homes this year,” it said in a report released today.

Of this 6,176 units slated for completion this year, about 49% will be located outside the city centre, the firm said.

More units are also expected to come on board in the secondary market, exerting greater downward pressure on prices, it said.

In the first quarter of 2018 (1Q18), prices for high-end condominiums eased marginally by 1.5% quarter-on-quarter to RM751 per sq ft, with rents declining 3.3% to RM2.95 per sq ft.

Effective from Jan 1, for homes costing more than RM1 million, stamp duty was increased from 3% to 4% per cent to discourage property speculation, with Bank Negara Malaysia issuing warning of potential financial risks.

Coupled with the growing uncertainties in the environment and lack of new catalysts to drive sales, the residential market in 2018 is expected to remain “subdued”, said Nawawi Tie Leung.

Similarly, the office market is expected to remain challenging on the back of lacklustre demand from the oil and gas sector, despite oil prices recovering to the US$70 per barrel level.

While serviced office or co-working operators will form part of the demand — as they seek to open more offices in the Klang Valley — the incoming office supply of more than 10 million sq ft in the next few years will phase out older buildings unless they are refurbished or re-purposed.

As such, the property consulting firm expects occupancy and rental rates to remain under pressure. In 1Q18, occupancy rate fell from 80.4% to 80% due to continued low absorption and large amount of supply; while average rental rate in the office space fell slightly from RM6.02 per sq ft to RM5.98.

Over at the retail sector, sales of brick-and-mortar malls expanded by 2% in 2017, lower than forecasted, despite stronger aggregated private consumption, said Nawawi Tie Leung.

“While the rising cost of living is often blamed for the slow growth of retail sales, there are fewer people congregating at the malls due to the convenience of online shopping,” it said.

In 1Q18, occupancy of retail malls in Kuala Lumpur eased 1% to 86%, on a quarterly comparison.