Covid-19 pandemic not only provokes challenges along with the economic downturn, but also brings opportunities and changes to the country’s housing market. A “reset” is significantly observed in both the supply and demand sides of the market after the disruptive impact of the pandemic, and is likely to bring changes to structural issues – oversupply, overhang, overprice – that facing the industry.
As indicated by the lower housing supply-demand ratio – a ratio of existing housing stocks to the number of households that is used to examine if there is an imbalance between the supply and demand of housing in a country or state – the current housing market is becoming more stabilised. Prime property markets that once considered as “oversupply” and “near-to-saturation” in 2019 are experiencing a drop in 2022 .
While overhangs are found decreasing from 35,592 units in Q1’22 to 34,092 units in Q2’22, it is undeniable that the figure is still trending high compared to the one in the pre-pandemic era. Having said that, overhangs in the residential housing segment are not as severe as we thought, as it happens across the board of all pricing category of products, with a majority of them contributed by products priced RM500,000 and below.
In terms of the demand side, a high number of residential housing transactions – with an increase of 26.3% in volume and 32.2% in value year-on-year – indicates that homeownership aspiration in a developing country like Malaysia still remains high. It is just that potential buyers are more realistic and cautious when it comes to buying properties amid the high-cost environment.
Instead of lowering the price points on products as an attempt to enhance competitive advantage, or relying heavily on market-spurring initiatives, property developers should strike for “value creation” when positioning their products in the market. It is because only products that can deliver a sense of “practical”, “humanised”, and “value-added” living environment are more likely to resonate with today’s home buyers.
But prices hardly came down during that period. To reset is to allow market forces to work freely. By right the property prices across the board should have come down at least 40% from the peak a few years ago. Property prices... the salary/wages will never be able to keep up.