PROPERTY

OUTLOOK
REPORT 2016
Looking Beyond the Horizon

Pre-amble
The PropertyGuru Malaysia 2016 Property Outlook Report
presents an overview of the Malaysian real estate sector in 2015
while also providing an expert and educated view of trends and
developments for 2016.
This inaugural edition covering the Malaysian property market is
part of PropertyGurus bigger mission to bridge the information
gap and to provide market-leading, industry intelligence so
as to make available timely and relevant industry information
and insights so they more Malaysians are empowered to make
property related decisions with greater confidence and clarity for
the year ahead and beyond.

Table of Contents

Page 1

Message from Steve Melhuish, Group CEO and Co-Founder

Message from Sheldon Fernandez, Country Manager

Malaysia Property Market Overview

Page 3

Review of Greater Kuala Lumpur

Page 8

Review of Landed Properties in Greater Kuala Lumpur

Page 13

Review of High-Rise Properties in Greater Kuala Lumpur

Page 15

Page 19

Get the Guru View: Property Outlook for Greater

Kuala Lumpur in 2016

Acknowledgments
Page 29

References & Information Sources

Page 30

The Winning Difference of Market Intelligence

Greetings!
It is with pleasure that we give you our inaugural outlook report
for Malaysia, which we believe will be a valuable guide for anyone
interested in the local real estate sector.
Having published similar versions in Singapore, which were
well received, we are confident that the Malaysian version will
also receive encouraging response as the report is not a mere
compilation of facts and figures, but also presents the Guru View
a comprehensive outlook of whats coming up on the 2016 horizon.
We know that Malaysians are very passionate about property.
Whether youre a millionaire real estate investor or looking to buy
your first home, real estate is a topic that is close to the hearts of
almost everyone.
Property is perhaps the one of the most popular topics for
discussion and at gatherings. Whether youre a millionaire real
estate investor or looking to buy your first home, real estate is
always on the lips and minds of most people.
Yet, there is little insightful content available. Content that cuts
through the clutter, provides pertinent or key facts and details and
allows people to make better property decisions for themselves.
In essence, this is the objective of our report.
PropertyGuru is uniquely positioned to provide such market data
and intelligence because, as the dominant regional property portal,
we are able to effectively feel the pulse of the various markets we
operate in Malaysia, Singapore, Thailand and Indonesia.
We collate relevant data, as well as have the networks tap the
minds of local and international property experts. We know what
properties people are searching for, the price ranges, locations
and so on. When you bring all of this information together, clearly
we are well positioned to provide a rich perspective of what has
transpired in 2015 and what 2016 holds for us.
We understand that buying a property is probably the biggest
investment decision that anyone could make and we at
PropertyGuru, wish to help you along the way so that you
become a more sophisticated property buyer, seller or investor.
With that, I wish you happy reading and happy hunting. Heres to
many more!
Steve Melhuish
Group Chief Executive Officer and Co-Founder
PropertyGuru Group

Property Outlook Report 2016

Page 1

Reviewing the Present,

Re-strategising For the Future
Hello there!
Malaysias property market has been through a challenging
period and many are concerned on what lies ahead. Should we
sell or buy? Invest for the short term or long-term? Are prices
coming down or going up? There are certainly many questions
at this point, perhaps more than answers.
We dont have a crystal ball, but by reviewing our vast amounts
of data, presenting the thoughts of leading industry experts and
tapping on our own understanding of the local market, we can
certainly draw reliable conclusions of what would be the likely
scenario in 2016, barring any unforeseen circumstances.
The world of property can be confusing, especially when trying
to plan for the future. As the market grows in sophistication,
there is also greater complexity; the information gap can be
bigger at times. This is something that we at PropertyGuru feel
strongly about addressing.
Demystifying the world of property, removing the information
barriers, providing access and helping people, these are the
essence of our brand values and the report is a reflection of
these attributes. This is part of our continuing effort to provide
intelligence that really matters, when and where you need it.
With that, I wish to end by thanking you for your continued
support in PropertyGuru and we look forward to continue serving
you as your preferred property portal and partner.
Sheldon Fernandez
Country Manager
PropertyGuru Malaysia

Property Outlook Report 2016

Page 2

Malaysia Property Market Overview

Summary and Key Findings

In 2015, Malaysias property sector continued to see a downward trend of

reducing transactions and for the first time in several years, reducing sales value.
Out of 10,877 units launched (10,550 residential units) across Malaysia, only
4,373 or 40% found buyers. A large number of the unsold units were mostly in
Penang, Greater KL and Johor. Most unsold stock was mainly in the RM500,000
to RM1mil price range.
Loan rejections increased to 35% of total applications a 6% increase from
29% in the previous half. Most rejections were for properties priced between
RM250,000 -RM500,000, followed by those between RM700,000 and RM1 million.
Supply of private housing is not at a price that the market can afford.
PropertyGurus recent Consumer Sentiment Survey showed that 75% of
Malaysians feels that property in Malaysia is expensive.
Khazanah Research Institute (KRI) states that Malaysias housing market is
severely unaffordable with median house price 4.4 times of median annual
household income exceeding the global average of 3.0 for the affordable
market range.

Macro-Economic Performance

The Malaysian economy continued to maintain a positive growth trajectory in 2015 with
average GDP growth of 5.3% for the first half of 2015 (first quarter 5.6% and second quarter
5.6%). In 2014, GDP growth was 6%.
Domestic consumption was the key contributor to economic growth which helped to
mitigate the effects of reduced foreign investment. Domestic consumption grew by an
average of 7.65% (first quarter 9.6% and second quarter 5.7%). The Consumer Price
Index (CPI) increased to 2.2% in the second quarter of 2015, largely attributed to the
implementation of the Goods & Services Tax (GST).
Overall, the economy has performed reasonably well thus far given the prevailing backdrop
of the oil price slump which has impacted national revenues, a depreciated ringgit against
major currencies and the implementation of Goods and Services Tax (GST) as well as the
ongoing 1MDB issue.
However, the less than buoyant economic climate further dampened market sentiment for
the local real estate sector.

Property Outlook Report 2016

Page 3

The Property Sector

In 2015, Malaysias property sector continued to see a downward trend of reducing sales
volumes (transactions). For the first half of 2015, volume of transactions numbered 186, 661
while transaction value had decreased to RM76.609 billion. This indicates that booth prices
and demand has tapered off.
In addition, house prices had also decreased the first time in many years. The Malaysian
Housing Price Index (MPHI) decreased significantly.

PROPERTY MARKET REPORT

MHPI Percentage Change Over 12 Months

Q1 2000 - 02 2015
15
12.2

12

9
6

5.9

4.9
3
0 0.6
Q1 00Q

2 15

2011

2012

Volume of Transactions
430,403

Volume of Transactions
427,520

Value of Transactions
137,83 billion

Value of Transactions
142,8 billion

2013

2014

Volume of Transactions
381,130

Volume of Transactions
384,060

Value of Transactions
152,37 billion

Value of Transactions
162,97 billion

All House

The chart above shows that house prices had seen the biggest appreciations in recent
years (2009-2012) prior to the introduction of cooling measures by the Government via Bank
Negara Malaysia, mainly to curb speculative activity. Following which, prices continued to rise,
albeit at a much slower pace. At present, it appears that property prices are moderating.

In previous years, transactions dropped but values continued to rise indicating that house
prices were still on the rise. There was also still a buying public supporting the market.
This is not the case anymore for 2015.
The public are finding properties expensive and are holding back their purchase
decisions, a view supported by PropertyGurus own findings. PropertyGurus recent
Property Affordability Sentiment Index Report (Consumer Sentiment Survey) showed that
75% of Malaysians feels that property in Malaysia is expensive. Only 25% were satisfied
with current market conditions and prices.

Property Outlook Report 2016

Page 4

PropertyGuru Consumer Price Satisfaction Index 1H 2015

The percentage score of 25% is based on the combination of the top two tiers (7% very
satisfied and 18% satisfied) which gives an overall score of 25%. For further details,
please refer to the full Property Affordability Sentiment Index Report) available for
download via: http://bit.ly/1RaCjyh

The key reasons for the dissatisfaction are the perception that properties are overpriced
(86 percent), the rapid price increase (61 percent), the slow economy (57 percent) and
unpredictable market conditions (37 percent). 78 percent of the respondents also cited the
lack of effort by the government to address the present climate of the property sector as
another reason for dissatisfaction.
The same survey also recorded that GST was also a factor in dissuading Malaysians to buy
properties. 60% of respondents felt that the newly implemented measures affected their
decision to buy properties.

Property Outlook Report 2016

Page 5

PropertyGuru Property Affordability Sentiment Index Report 1H 2015

What is Driving High House Prices?

Higher land costs, construction material prices and labour costs plus the increased authority
requirements (compliance costs) are given as key reasons for the dramatic rise in prices.
Speculative activity has also been identified as a culprit in the past for significant rising
prices in Greater KL, Penang and Iskandar Malaysia.
The added implementation of GST in April 2015 also contributed to price increases and a
drop in sentiment in house buying, While house prices are exempt from GST, construction
materials and other inputs and resources are not and the added costs have been passed on
to buyers as property developers admit they are unable to absorb the added cost.
Developers are also feeling the pinch of GST. Two thirds of the developers said GST had
caused property prices to rise and 22 of them said prices went up by over 5%. 80% of the
respondents cited a cost increase of between 3% and 5% while 67% of the respondents
indicated between 3% and 5% hike in house prices due to GST.
However, some argue that this also due to lack of political will or developers are just making
huge profits at the expense of the Malaysian homeowner. Others say that as the country
develops, it is only natural for homes to become pricier following trends of other developed
nations i.e. the UK, Hong Kong and etc.
The issue is contentious to say the least and there is no clear answer. The most affected is
the middle-income demographic, those earning between RM5,000 and RM10,000 who do
not qualify for low-cost housing or various forms of government assistance but also cannot
afford to purchase from the open market.
Annually, there is demand for 250,000 property units from owner-occupier property buyers,
consisting of married, divorced, single and foreign buyers. Owner occupiers account for
about 54% of the buying market with the rest being investors and foreign buyers. But it
seems that the supply of private housing is not at a price that the market can afford.

Property Outlook Report 2016

Page 6

Regional Perspective

However, when compared regionally, Malaysia continues to present a viable proposition for
property investing, despite various measures imposed by the government and the current
market sentiment and conditions.
More developed markets such as Malaysia and Singapore may not be as attractive as
emerging markets (Cambodia, Vietnam, Thailand, etc.), it certainly has its plus points.
The Malaysian property market still remains one of the most open market to foreign buyers.
There is clear legislation and procedures that allow foreigners to invest in Malaysian property
including freehold property. Foreigners may also apply for financing.
Importantly, from a regional perspective, the Malaysian property market remains relatively
stable, presenting a good location for investment, be it for a retirement home, a vacation
property.
There are few dramatic fluctuations in pricing during upturns or downturns. The market
remains relatively stable. There is plenty of market liquidity, the government is undertaking
various infrastructure projects, coupled with a track record for social and political stability,
Malaysia certainly retains its prospects as a sound investment destination for the long term.

Property Outlook Report 2016

Page 7

Review of Greater Kuala Lumpur

Summary and Key Findings

Number of residential units sold in Selangor and KL both reported a significant drop of
5.6% and 21.3% respectively from Q4 2014 to Q1 2015. Value of transactions on average
decreased by 5.4% in Selangor and 22.8% in KL respectively across the board for all
residential property types.
Developers have begun to increasingly adopt the smaller unit model for strata developments
within the city centre as well as key urban areas. About 55% of residential transactions in
Greater KL were for homes below RM500,000.
Greater KL is considered the most expensive place to buy a property with the lowest
affordability ratios alongside Penang.
Oversupply of properties especially in the high-end condominium market.
MRT has certainly had an effect on properties located within a 1KM radius.
On the whole, the number of residential units sold in Selangor and KL both reported
a significant drop of 5.6% and 21.3% respectively from Q4 2014 to Q1 2015. Value of
transactions on average decreased by 5.4% in Selangor and 22.8% in KL respectively across
the board for all residential property types.
The property market in key urban areas such as Greater KL is currently facing a recession of
sorts in 2015. Data does not lie. There is certainly oversupply as the properties bought in 2012
and 2013 came into market this year and so this year, you have certain market segments that
are overbuilt or oversupplied, shared Siva Shanker, CEO Agency of PPC International Sdn
Bhd.
However, this does not mean residential properties are cheap in Greater KL.

Property Outlook Report 2016

Page 8

Flg 22 KL and Penang markets are for the deep pocket customers

Loan Affordability Ratio

90%
80%
70%
60%
50%
40%
30%

Average DSR 35%

20%

KL
Johor
Average DSR

Malaysia
Selangor
Penang
Ave. Mortgage Rate (RHS)

Assumptions: LTV 90%, 30-year mortgage @ 4.45% p.a., 35% DSR

Source: DSOM, NAPIC, Macquarle Research, October 2015

The average Malaysian affordability ratio (loan repayment to take home pay) is 32%35%. However, in Kuala Lumpur and Penang, homeowners are paying up to 41% and
38% of their monthly income to service their loans. Selangor and Johor are still below
the national level, at 31% each.
This clearly indicates that properties in Greater KL are still expensive despite the
drop. Take-up rates also have slowed.
Flg 30 Take-up rates based on princing range

Flg 29 Take-up rates of all the property launches

80%

70%

75%

76%

68%
66%

66%

70%

70%
67%
64%

64%

64%

65%

60%
58%

58%
56%

60%
55%

65%
50%
2008

62%

54%
52%

2009

2010

2011

2012

Malaysia

Kuala Lumpur

Johor

Penang

Source: NAPIC, Macquarle Research, October 2015

2013

2014
Selangor

2015F

50%
2008

2009

2010

RM500k<

2011

2012

RM500k< RM1m

2013

2014

2015F

>RM1m

Source: NAPIC, Macquarle Research, October 2015

There has been no price correction on raw land, which has maintained its value over
the years even increasing steadily over time. The price correction has only been on
completed products. This will certainly have an effect on overall cost and eat into the
margins of developers; or the cost has been passed on to consumers, said Ishmael Ho,
CEO of Ho Chin Soon Research.

Property Outlook Report 2016

Page 9

More Small Units in 2015

In 2015, developers have begun to increasingly adopt the smaller unit model for strata
developments within the city centre as well as key urban areas. The trend was to develop
smaller units in the urban areas and to look to the suburbs for bigger landed properties.
Hence, the rise of the studio unit which has grown in popularity across Greater KL.
While there is little conclusive data on how many smaller built-up units 800sqft and
below were sold in Greater KL, a cursory look at marketing materials from developers is
proof that smaller units were very much in vogue for the year.
About 55% of residential transactions in Greater KL was for homes below RM500,000.
This certainly alludes to smaller units being transacted from anything of 500sqft to
800sqft, depending on the area. It certainly makes sense for developers to adopt this
approach to stay below the RM500,000 threshold for an affordable property, which is
within the financial reach of many buyers, shared Ho.

Suburban Living to the Fore

Another trend that continued to emerge in 2015 was the shift from the city centre
towards the suburbs the residential areas within 10-30 km radius from the heart of
the city centre.
In fact, this escape to the suburbs is becoming a growing trend that is bound to
become more prevalent in the future. More so with the arrival of the MRT and the LRT
extension this makes it feasible to live further away; but to work in the city centre.
Key areas that fall within this radius Rawang, Sungai Besi, Kajang, Setia Alam,
Semenyih, Putrajaya, Nilai, Sungai Buloh, Setia Alam and more have continued to see
development activity despite the sluggish property market. And it is these locations that
have somewhat bucked the prevailing trends.
While Greater KL has not been spared the market downturn, perhaps feeling it even
more than other locations, its strong fundamentals continue to drive its allure and
potential as a hotbed for property. Simply because Greater KL is a vast area that covers
very distinct areas that each has its own micro-market, shared Property Trainer & Best
Selling Author Milan Doshi of Wealth Mastery Academy.
This is true considering that market conditions for property in Kuala Lumpur City Centre
differ greatly from that of Putrajaya, the nations administrative centre. The city centre with
its luxurious, up-market penthouses differ from the expanding suburbs that radiate from
the heart of Kuala Lumpur.
It has not been all doom and gloom with several areas doing rather well. Together with
branding, a good project concept and the benefits of accessibility and connectivity,
some projects have still sold in Greater KL, especially those connected to the MRT network.

Property Outlook Report 2016

Page 10

MRT & BRT Impact

The impact of the MRT has certainly been felt on residential property in 2015. In some
areas, prices have appreciated strongly and continue do so as the MRT construction
continues to progress.
In 2015, some areas prices have appreciated by over 40% due to the MRT. As the line
begins to take shape and becomes more apparent to people, so do the value of property
prices. Throughout key areas such as Sungai Buloh and Kajang, 2015 has been a good
year for property owners who own residences within a 1km radius to the MRT line.
The impact of the Bus Rapid Transit (BRT) system, which was implemented via the BRTSunway line in 2015 is yet to be fully felt, but already it has received positive reviews
from the local community. The BRT line measures 5.4km and is served by 15 buses with
a 7-stop route. It is fully elevated and operates as a top speed of 80km/hour. Each bus
seats 25 passengers with a capacity of 67 people.

Status & Impact of Infrastructure Projects

Greater KL also has many significant infrastructure drivers or catalysts that continue to
drive the momentum despite the downturn. All of these macro projects were in different
phases of preparation or work commencement in 2015.

Property Outlook Report 2016

Page 11

The two infrastructure projects that saw notable progress in 2015 was the continued
progress of MRT Line One which stretches from Sungai Buloh in the north of Greater KL
to Kajang in the south. The line is slated for completion in 2016.
In addition, 1MDB Real Estate Sdn Bhd (1MDB RE) has secured the planning approval for
the development of the mixed-used Bandar Malaysia project in Sungai Besi by the Kuala
Lumpur City Hall. The project is undergoing a commercialisation process which is part of
the rationalisation plan of 1MDB.
Situated a mere seven kilometres from the Kuala Lumpur City Centre (KLCC), Bandar
Malaysia will serve as the gateway of Kuala Lumpur for the high-speed rail (HSR) to
Singapore as well as become a central transport hub within the city through ERL, KTM
and MRT line 2.
Other notable game-changing projects in Greater KL are the RM5 billion Warisan Merdekas
118-storey building, the 22-acre Pudu Jail Development, the 3,155-acre Kwasa Damansara
urban transformation project and the RM15billion Naza KL Metropolis.

Property Outlook Report 2016

Page 12

Review of Landed Properties

in Greater Kuala Lumpur
Summary and Key Findings

Landed property performed reasonably well in 2015, providing a much needed bright
spot for the market. Best-selling landed homes were double and triple storey houses.
Bulk of supply provided in the suburbs 10km-30km away from the city centre.
Landed homes are generally sought after by mostly owner-occupiers with higher
disposable income or as a long-term investment (10 years and more).
With lower rental yields and slower capital appreciation, speculators generally are not
keen on landed properties.
Among the key areas that did well in 2015 were Coalfields, Ampang Heights, parts of
Klang, Sepang, Semenyih, Puchong South and Putrajaya. However, landed properties
in mature areas closer to the city centre also did well.
If there was a bright spot in the property market for 2015, landed property could probably
be it, accounting for more than half of the units sold thus far according to REHDA. Of this,
the best-selling landed units were double and triple-storey houses.
The view is echoed by other real estate sources who believe that for the most part,
the landed real estate segment remained robust; especially projects developed by
established developers and which offered the benefits of security and were close to key
amenities such as schools, hospitals and shopping malls.
The general trend was for supply of new landed property to be built in the suburbs
outside of the city centre. The bulk of new units that came into the market in 2014 and
2015 were in key areas such as Rawang, Semenyih, Kajang, Setia Alam, Klang, Nilai,
Seremban and others. These were mostly super-link terrace homes developed to cater to
the demand from those who prefer space with some Semi-Ds and bungalow residences.
It is only natural that as Greater KL expands, the city will start growing outwards towards
the suburbs. In the past five years, Malaysias population growth is measured at 1.6%.
However, urban population growth has been close to 2.9% with the country having an
urban population of 74%.
As for established neighborhoods, landed properties in these areas continued to maintain
their higher valuations though price appreciation may have somewhat slowed. There were
probably the odd below market value transaction due to sellers looking to cash out, but
by and large, prices remained firm.
There are many reasons why landed properties have withstood the market slowdown
better than high-rise homes.

Property Outlook Report 2016

Page 13

One is that landed homes are generally more sought after by owner-occupiers and a more
affluent or financial stable demographic. Buyers often are dual-income families, with higher
disposable income who are looking to upgrade to a bigger home or to offer a more relaxed
or scenic lifestyle for their families away from the hustle and bustle of the city centre.
Landed is generally for own stay or long-term investment by investors with deep
pockets. So, the market is more stable and more reflective of actual demand, shared
Khalil Adis of Khalil Adis Consultancy.
Speculators generally are no longer keen on landed properties as these are harder to
flip. Rental yields are also lower for landed properties compared to high-rise strata
units, while appreciation for landed homes has somewhat slowed compared to the heydays of 2008-2012.
Among the key areas that did well in 2015 were Coalfields, Ampang Heights, Parts of
Klang, Sepang, Semenyih, Puchong South and Putrajaya. However, landed properties in
mature areas closer to the city centre also did well.
For landed, terrace houses in KL, from May to October 2015, transaction prices in key
areas such as Old Klang Road remained strong between RM390-480 per sqft. Further
South, Cheras, & Sri Petaling stood about RM307-RM391 per sqft. At the North of
Greater KL, areas in the vicinity of Segambut and Kepong fetched transaction prices of
RM370-400 per sqft. While affluent areas such as Taman Tun Dr Ismail (TTDI) sold at a
premium of RM720 per sqft and above.
On the whole, average price per sqft for landed property in Kuala Lumpur was around
RM500 sqft and average price for a terrace home going for RM900,000 to a million.
Looking at landed homes in Selangor, in matured Petaling Jaya, houses transacted at
an average price of RM670 per sqft, Seri Kembangan, 362 sqft, Sungai Buloh, 403 sqft.
Average sqft price ranged from 370sqft-850sft depending on location with the average
property price of properties sold in the last four months ranging from RM680,000 to
RM2.2 million.
Essentially, landed properties in Selangor did very well, less so for Kuala Lumpur.

Property Outlook Report 2016

Page 14

Review of High-Rise Properties

in Greater Kuala Lumpur
Summary and Key Findings

Overall, high-rise homes saw a slowdown in sales and the most impacted was the high end portion of supply. Of the 4,259 units launched in 2015, take-up was rather poor
with only 779 being sold.
Depreciating Ringgit has not had a major catalytic effect on foreign buyers.
The high-end market most affected with rental rates dropping by as much as 30%.
Strata units or high rise apartments and condominiums across the Greater Kuala Lumpur
area generally saw slow sales. Despite developers being creative in marketing their
products throwing in free goodies and various incentives, sales have still been hard to
come by. It appears also that the depreciating Ringgit has not had a major catalytic effect
on foreign buyers.
Most impacted was the high-end condominium market. Of the 4,259 units launched
in 2015, take-up was rather poor with only 779 being sold. Despite average prices
decreasing by 3.2% in Q1 15 q-o-q to RM749 per sqft from RM774 per sqft in Q4 14 (as
cooling measures took effect), sales were still tepid. Notably, high-end condominiums
saw a drop in both rental and capital values. On average, rental decreased marginally by
2% to RM3.42 per sqft per month, down from RM3.49 per sqft per month in the previous
quarter.
The marginal drop in pricing was not impactful enough to stimulate demand given the
already high levels of pricing reached in the previous years.
Across the key high-end markets in Greater KL KLCC, Bangsar, Mont Kiara, Ampang
and so on, rental rates have been dropping. Lots of expats have left. The recent
government measures have dampened foreign interest for properties, shared Khalil.
The high-end market has certainly been affected with rental rates dropping by as much
as 30%. The market had not recovered well from the 2008-2009 global crisis, but supply
kept coming into the market. The result is this: too much supply at prices that people
who need such homes cannot afford. And with the reduced foreign sentiment in 2015, the
market is further impacted, shared Shanker.

Property Outlook Report 2016

Page 15

Rentals
Rental rates
(based on asking rents)

RM psf per month

5.25
5.00

KLCC

4.75

Bangsar

4.50

Mont Kiara

4.25

3.96

4.00
3.75
3.50

3.35

3.25
3.00
2.96

2.75

2015 Q1

2014

2013

2012

2011

2010

2009

2008

2007

2006

2.50

Source: Savills Rahim & Co

From 2009-2013, prices for high-rise homes have continued to surge eventually
becoming unaffordable for the bulk of middle-income Malaysians. The effects of investor
speculators who flip upon completion or even before completion have been a key factor
in this price rise.

Property Outlook Report 2016

Page 16

Secondary market
Capital values
(based on sales)

1,150

1,106

Bangsar

KLCC

Mont Kiara

1,050
950

898

RM psf

850
750

675

650
550
450

2015 Q1

2014

2013

2012

2011

2010

2009

2008

2007

2006

350

Source: Savills Rahim & Co

The high prices of strata units have placed many out of reach of the typical target market
buyer segment the middle income, young urban demographic of newly-weds, single
working adults and so on. Also, the inability to obtain financing by many buyers has also
contributed to the drop in sales. The removal of DIBS may have also led to primary sales
activity slowing down.
PropertyGurus own findings also show that buyers believe the market is oversupplied,
especially in the high-rise segment.

Property Outlook Report 2016

Page 17

PropertyGuru Property Affordability Sentiment Index Report 1H 2015

In coping with the situation, developers have switched to selling smaller, but amenities
and feature rich homes. This includes studio units, SOHOs, SOFOs and so on. By offering
smaller homes, the price tag can still remain below the RM500,000 threshold, which is the
industry accepted benchmark as an affordable priced housing.
Interesting to note, both younger and older buyers are opting for such homes but for
different reasons. The younger segment cites affordability while the older generation
prefers to sell their larger landed homes and move to a smaller, more manageable home
in the sky. It appears that the empty nest syndrome that of aged parents living alone
after their adult children have left the nest, is a driving factor for developers to consider.
That being said, the prime target market for high-rise homes is the young urbanite or
young middle income family looking to secure their first or second home.
However, properties in the RM300,000 to RM600,000 range continued to receive interest.
Units that have continued to sell despite the slowdown are those that adopt an integrated
approach the Transit Oriented Development (TOD) or Transit Adjacent Development
(TAD) model, whereby the project is integrated or placed close to public transportation
just 400-800 metres away. Examples include PJ Midtown, Saville Cheras and so on.
Locations that were close to educational institutions saw strong rental yields. This
includes developments such as One South in Seri Kembangan, Sri Tiara in Subang Jaya
and others.
A companys brand name also carries a lot of weight, more so now in such challenging
times. If a developer has had a strong track record of successful projects delivered on
time with strong capital appreciation, this augurs well in their favour. Buyers are certainly
more wary and cautious when it comes to taking the plunge in buying a home.
Not only do such high-rise developments offer convenience, they are able to fetch better
capital appreciation and rental yields in the long run, making them more desirable to the
target demographic.
With regard to transaction prices for high rise units, Kuala Lumpur saw an average
price per sqft of 590sqft with the average price for a high-rise residence close to the
RM900,000 mark. In Selangor, prices were lower with average sqft foot price reaching
RM500 per sqft and strata units valued on average at RM630,000.

Property Outlook Report 2016

Page 18

Get the Guru View: Property Outlook

for Greater Kuala Lumpur in 2016
Summary and Key Findings

In essence, 2016 will be very much a buyers and renters market with plenty of bright
spots and plenty of opportunities, especially in the secondary market.
In 2016, the property market is expected to continue with its downtrend for the first half
of the year, before recovering or stabilising within the second half.
Prices in general are expected to come down slightly as would transaction volumes.
There of course, will be certain properties in prime areas (i.e. near the MRT, etc.) that
will continue to appreciate.
With speculators having virtually been totally removed from the market, the year would
be driven by more genuine demand that of owner-occupiers and long-term investors,
which would help build a more sustainable, resilient and realistic market.

Macro-economic View

With oil prices still at a low hovering at the USD40-USD50 range and the ringgit heavily
depreciated, economic conditions are expected to be challenging for Malaysia in 2016.
Coupled with the impact of reduced domestic demand due to GST and reduction in
subsidies; and reduced foreign investment given the on-going economic and political
developments, 2016 does not look rosy. In essence, the conditions felt in the second half
of 2015 are expected to continue into the next year.
However, it is not all doom and gloom. Malaysias rating has been upgraded from
negative to stable at the end of Q2 2015, which is certainly a sign that Malaysias
economic fundamentals are intact. Furthermore, the depreciated ringgit may work in
favour of Malaysias export driven economy. Tourism may also see a boost in receipts.
If the 1MDB issue is resolved in 2016, investor confidence will be restored and there
could be an injection of foreign direct investment (FDI) into the country. This will also
bolster confidence in the Malaysian Ringgit, which will once again place Malaysia back on
track for strong growth. If oil prices recover going into 2016, Malaysias prospects for the
next year will certainly look better.
In 2016, economic growth is expected to still remain positive, though at a slower pace.
GDP growth is forecasted at 4%-5%. This is lower than the targeted annual GDP growth
of 5% to 6% by the Malaysian Government for the 2016 2020 period as stated in the
11th Malaysia Plan.
The bearings that the macro-economic scenario will have on the property market in 2016
are still unclear, but certainly the consensus is to expect the sluggishness of the previous
year to persist.

Property Outlook Report 2016

Page 19

2016 Property Market Outlook

In 2016, the property market is expected to continue with its downtrend for the first half
of the year, before recovering or stabilising within the second half. This could set the
stage for a recovery in 2017-2018. Essentially, prices in general are expected to come
down as would transaction volumes. One can expect a market correction / revision of
3-4%. This is especially true for high-rise units, especially the high-end market.
There of course, will be certain properties in prime areas (i.e. near the MRT, etc.) that will
continue to appreciate.
Having said that, do not expect prices to come down substantially. Aside from
speculation, the many other factors driving high property prices land scarcity, public
sentiment, construction and compliance costs, strong demand, rising cost of living, etc.
are still present and will continue to put pressure on prices.
With speculators having virtually been totally removed from the market, the year would
be driven by more genuine demand that of owner-occupiers and long-term investors,
which would help build a more sustainable, resilient and realistic market.
In essence, 2016 will be very much a buyers and renters market with plenty of bright
spots and plenty of opportunities, especially in the secondary market.
Malaysians generally will adjust to the situation. All said and done, a home is a basic
necessity so in the second half of 2016, buyers will come back into the market and
things will pick up again. The property market is cyclical in nature and 2016 will lay the
foundation for a more robust and realistic market come 2017 and 2018. The next surge
could be in 2019-2020. 2020 is potentially the next market high, explained Shanker.

Property Outlook Report 2016

Page 20

2016 A Buyers Market

2016 is widely accepted to see a buyers market due to the current overhang of properties.
On average, 36% of new properties are unsold in Malaysia annually. Yet, supply of new
properties coming into the market remains constant or has increased.

Property Outlook Report 2016

Page 21

Organic demand that is demand from genuine buyers (owner-occupiers) only makes up
54% of total buyers every year. The rest are investors. With the market in a downturn,
investor sentiment may not be upbeat, hence resulting in a situation of ample supply but
little demand.
The existing unsold supply, together with new supply of completed projects is going to
exacerbate the current market overhang. This will be especially evident in the mid to highend and high-end markets.
The situation may place further pressure on developers and speculators so it is quite
reasonable to expect many good deals to come into the market in 2016.
Those who bought multiple units based on DIBS to flip are going to have a difficult 2016.
They will come under pressure to push their units dropping prices of face the risk of
foreclosure. Most will try to dispose of their less attractive properties. But during a bear
market, it is harder to do so. Ultimately, they will have to sell their better properties and this
is where others can profit, shared Doshi.
However, this does not mean that prospective homeowners can start demanding prices or
developers will throw prices. It just means that deals would be sweeter, especially for firsttime buyers.
You can expect plenty of incentives, rebates, freebies and goodies that make your
new home deal more enticing. These could include full furnishing or partial furnishings,
Guaranteed Rental Returns (GRR) schemes, indirect price rebates and discounts; free
air-conditioning units and much more. While these may seem superficial, they are not to
be overlooked. At times, freebies such as these can help buyers save on renovation and
refurbishing costs.

Property Outlook Report 2016

Page 22

Consider the Secondary Market

The secondary market (completed properties) may offer better deals than buying off the
plan from developers. With supply not moving i.e. being sold, developers will come under
pressure to offload unsold stock, resulting in many good offers to come into market. This is
already being seen in 2015 and is expected to be more apparent in 2016.
In addition, speculators who did buy for flipping purposes in 2012 and 2013 will have their
units completed. But with the cooling measures including RPGT, they may be hard pressed
to flip, which means they will also need to bear the costs of servicing loans.
If you have the funds, I would suggest buying secondary market properties in established,
proved areas such as Bangsar, TTDI, Hartamas, KLCC, Brickfields, etc. These cost more
but for a reason properties here have proven their investment value over time and will
continue to perform well. Its not an exciting growth play, but its a safe and stable bet.
Some sellers could have bought those properties many years ago, say 10-15 years at
much cheaper prices, so they more willing to dispose at lower prices as they already have a
decent gain to make, shared Doshi.
Searching the secondary market can find you properties that are 15-30% cheaper
form market prices. Sure, your entry or upfront cost is higher as there are no rebates or
incentives thrown in, but in the long run, you may find that total ownership cost is lower.
There is also the advantage that the home is built, you can see what youre getting, whos
living in the area and so on, what is the current rental returns from the market and so on.
Plus there is plenty of supply to choose from, explained Shanker.

Volume of Residential
Property Transactions
400,000

350,000

300,000
Primary
Secondary

150,000

100,000

50,000

2010

2011

2012

Source: PPC Research

Property Outlook Report 2016

Page 23

The data clearly shows that akin to the submerged part of an iceberg, the secondary
market offers much more supply than the primary market which is just the tip of the iceberg.
However since primary properties are better promoted, they naturally get more attention.
But in 2016, the smart play is to expand your options to consider both primary and
secondary markets.

Buy for the Long Term

The old adage continues to hold true for 2016. If you are buying for the long term, that is
anything beyond a 10-year horizon; your property should work out well.
Given Malaysias growing population, especially the young urban demographic, its
continued stable economic fundamentals and the continued expansion of Greater KL,
prices of houses will correct and stabilise and thereafter provide a stable rate of capital
appreciation as well as rental yield. In the long run, rental yields potentially will increase
over time as the population growth catches up with the supply of housing.
If you buy for the long-term, say 10 years and more, you cant really lose in property.
The longer you hold, the better. As to what to buy, landed properties will be prime. I foresee
residential terrace & Semi-D homes will become blue-chip properties. However, there are
pros and cons. Landed properties typically give you lower rental yields compared to strata
units. However, the former provides better capital appreciation so you decide based on
your financial resources and investing aspirations, highlighted Shanker.

Location is Important but Not Everything

One of the biggest questions for 2016 is to buy within the city centre or in the suburbs.
And perhaps the question is best answered by another question; that is: What is your
career trajectory or life path?
If youre young and have a bright career, then buy smaller but smaller units that are closer
to the city to the commercial and business heart as it would work out better for your
career. But if youre in your 40s or 50s and thinking or winding down, then the suburbs may
be more suitable. We get so caught up about value, prices and so on that we forget that
first and foremost a property is a home. It should be about supporting and elevating your
desired lifestyle, not buying a house then adjusting your lifestyle to suit it. Thats why always
buy what you can afford and buy based on your lifestyle and future goals, shared Ho.
With the improvements in mass public transportation the MRT, BRT and LRT so on, as well
as the development of new highways, this will improve accessibility and connectivity,
which means the question now, is not how far you are from the city centre but how long it
will take to get there.
With most middle income buyers priced out of the city, developers will start looking at
building more homes, both high rise and landed in the suburban areas. Think 20 or even
30 km.
Reason being that here land prices are cheaper and more affordable projects can be
made available to buyers. It may mean a little bit more travelling time, but with a good
interconnected network of highways and integrated public transport, this should not be
a problem for many.

Property Outlook Report 2016

Page 24

New locations are being opened up by these transportation projects, meaning you
could soon live almost anywhere and still have good access to move around Greater KL.
Rather than trying to buy close to the city centre and paying a premium or compromising
on space and lifestyle, you should look into buying into a premium development
or project further away that can fetch good rental yields and capital appreciation,
explained Shanker.

Smaller Units & Greater Density

With higher sqft prices, expect developers to continue building smaller units in the
city centre and other urban centres to keep their built-up prices below or within the
RM300,000- RM500,000 range. Unit sizes will range from 450sqft-850sqft. The SOFO,
SOHO and SOVO model will continue to be in vogue and by linking these with good
road access and public transportation connectivity, developers will look to push the
small is beautiful strategy to tap the market, especially the 25-35 year old demographic.
Looking at statistics, properties priced below RM200,000 (a reliable indicator of smaller
units) have actually gone up from 5% to 14% of all new launches. Secondly, half of all
property launched in 2015 were below RM500,000. This is a clear sign that developers
are moving towards smaller units. If this is anything to go by, one can expect the trend to
continue into 2016 and thereafter.
It is inevitable as Greater KL develops, we will have greater density and smaller units
following development patterns of other cities such as London, Hong Kong and so on.
This is the reality of urban living and people will need to get used to living further away or
living within the city but having less space.
In the past five years, Malaysias population growth is measured at 1.6%. However,
urban population growth has been close to 2.9% with the country having an urban
population of 74%.
I personally think that a SOHO in the city centre makes good sense. You can target the
expats or locals who are working the in commercial and business districts who wish to
be close to the workplace. There is a clear rental market for this demographic. But the
SOHO property should be close or within the urban areas, explained Khalil.

MRT / BRT / LRT

The MRT is perhaps the biggest game-changer for 2016 with the first line earmarked for
completion and operation by end 2016. The 51km Sungai Buloh-Kajang MRT line will
connect the North and South of Greater KL and is expected to ferry 400,000 passengers
daily.
When this happens, the impact of the MRT will be tremendous from alleviating traffic
congestion, influencing future development trends and of course, impacting property
prices and rental yields. Locations within 1km of an MRT station is expected to
garner a modest premium on valuations and rentals.

Property Outlook Report 2016

Page 25

It will allow people to live further away from the city and commute to work, school and
so on. This could potentially remove pressure on the city centre and create new property
hotspots, all along the MRT line.
By providing the missing link in the creation of a world-class integrated urban public
transportation system, the MRT lines (and LRT extension to a lesser extent), allow
people to stay anywhere, work anywhere and travel seamlessly, which will have a
positive effect on the real estate sector across Greater KL.
The MRT and LRT offer some bright prospects indeed. Its too early to get excited
about Bandar Malaysia and the HSL or the Tun Razak Exchange. But MRT Line 1 and
subsequently Line 2 will be a much needed boost well for the market in 2016, shared
Doshi.
MRT Line 2 is 56km and stretches from Sungai Buloh to Putrajaya through Serdang is
scheduled for completion by 2017. Completing the network is the 3rd line The Circle
Line, but official details have yet to be revealed. Together, the transformative effects of
these three lines are a game-changer to say the least.
The success of public transport is dependent on four main factors. Reliability is the
service reliable? Coverage Does it cover a wide area and lets me travel where I need to
go? Scheduling Are the service times suitable to the modern urban lifestyle and finally
cost is it affordable? If the MRT provides these, it will certainly transform Greater KL
like never before. Then well see a future where Malaysians will leave their cars at home.
Hard to envision at the moment, but this will happen, shared Ho.
Hence, it makes sense to make purchase decisions based on the presence and
proximity of your future home to the MRT line.
The recent BRT announcement of the KL-Klang line by the government during Budget
2016 are also welcome. Construction is expected to start in 2016 and this will have an
effect on house prices as well.
When people see construction, they get excited. They start believing that this is real, its
going to happen and thats when excitement picks up.
With regards to the LRT, The 18.1km Ampang Line LRT extension, is slated for
completion by March 2016. The 17.4km Kelana Jaya Line LRT extension, which
stretches to Putra Heights, will be ready by mid-2016.

Property Outlook Report 2016

Page 26

Tight Financing

Despite calls by many parties to relook financing for 2016, expect lending policies
to remain tight as Bank Negara Malaysia seeks to address the household debt-toGDP ratio. The Central Bank has further added that they will continuously monitor the
situation and may even implement measures to curb the growth of household debt when
necessary.
Banks too have followed suit by refining their lending and risk management practices
to improve quality across all loan segments. The onus is on buyers to ensure they are
credit worthy for housing loans. So a good move in 2016 is to improve ones financial
track record. Pay off or reduce credit card debt, check your credit standing via CTOS.
Show multiple streams of income such and declare all assets when applying for loans.
Banks are still lending but only to perceived quality house buyers.
A statement by the Association of Banks in Malaysia (ABM) said qualified first-time
house buyers will continue to secure financing. The business of our member banks
is in the main lending or extending credit. There is no intention whatsoever to make
lending more difficult, particularly for first-time home buyers. However, in conducting
affordability assessments, commercial banks take into account the applicants income
after statutory deductions, expenditure on necessities and all existing debt obligations
from banks and non-bank lenders.
It is also expected that interest rates might go up in tandem with rate hikes by the US
Federal Reserve. This remains to be seen but any hikes on the local Overnight Policy
Rates (OPR) by Bank Negara Malaysia is likely to be marginal as to not choke economic
growth, especially in the key retails sectors of property, automotive and so on.

Impact of GST

It is likely that in 2016, the initial knee-jerk reaction would have waned as consumers
would have adjusted accordingly to GST implementation. With that, buyers will soon
start coming back into the market, most likely in the second half of 2016.
In any case, GST is here to stay and will certainly continue to impact the property
market, perhaps not directly, but through the passing of additional costs incurred
to consumers.

Property Outlook Report 2016

Page 27

Will PR1MA meet its deadline?

The white elephant in the room is whether PR1MA will meet its deadline of providing
240,000 affordable homes by end-2015 and 500,000 by 2018.
If this supply comes into the market, it will certainly have an impact on property market
reducing demand for many property developers, which in turn may affect pricing.
PR1MA claims to have received close to 1.17 million applications that proves that there
is strong market demand for public housing over private sector supply.
One should continue to pay close attention to PR1MA as such a large number of supply
of homes would certainly impact the market in 2016 and beyond. In addition, those who
are eligible should make full use of government assistance and incentives for housing:
PR1MA

175,000 homes at 20% below market value

First Home Deposit Scheme

Provision of 10% deposit by government

forfirst time home buyers

PP1AM

100,000 homes priced between RM90,000

to RM300,000

GLC Affordable Home Programme

800 affordable homes built by GLCs near

MRT stations

Property Outlook Report 2016

Page 28

Acknowledgements
PropertyGuru would like to thank the following parties and individuals for their support
and contribution in this report:
1. Ishmael Ho, CEO, Ho Chin Soon Research
2. Siva Shanker, CEO Agency, PPC International Sdn Bhd
3. Milan Doshi, Best Selling Author & Property Trainer, Wealth Mastery Academy
4. Siti Aisyah Che Mahzan, Senior Research & Marketing Associate
5. Khalil Adis, Khalil Adis Consultancy

Property Outlook Report 2016

Page 29

References & Information Sources

1. Key Data H1 2015, National Property Information Centre (NAPIC)
2. Property Sales Data, National Property Information Centre (NAPIC)
3. Property Stock Report, Residential Property Stock Table Q2 2015 , National
Property Information Centre (NAPIC)
4. Greater Kuala Lumpur, Property Market Overview, May 2015, Savills Research
5. Malaysia Property, Riding the slow market, Macquarie Research
6. Property Insights, Malaysia Quarter 1 & Quarter 2, 2015, Citibank
7. Property Market Report 2015, PPC Research
8. Economic and Financial Developments in Malaysia, in the Second Quarter of 2015,
Bank Negara Malaysia
9. The Malaysian House Price Index, April-June 2015 edition, Valuation and Property
Services Department, Ministry of Finance Malaysia

Disclaimer:
While PropertyGuru has taken every effort to maintain the accuracy and timeliness of data and information
presented in this report, user discretion is advised when using this information in any way.
PropertyGuru and its respective directors, management, employees, and other affiliates will not be held
liable for any loss or damage including, without limitation, indirect or consequential loss or damage, or any
loss or damage whatsoever arising in connection with or via use of this report.
If needed, you should obtain appropriate professional advice before making any financial or property
related decisions.

Property Outlook Report 2016

Page 30

KL Office (HQ)
Wisma F-Secure, Level 3, Tower 3A
Avenue 3, The Horizon,
Bangsar South, No. 8, Jalan Kerinchi
59200 Kuala Lumpur, Malaysia
T (+603) 2279 7555 F (+603) 2279 7575
Penang
Level 9, Unit 9 (K), Wisma Boon Siew
No.1, Penang Road, 10000 Penang
T (+604) 262 0366 F (+604) 262 5366
Johor
Wisma SP Setia No: 02-01,
Jalan Indah 15, Taman Bukit Indah,
79100, Nusajaya, Johor.
T (+607) 239 5992 F (+607) 239 5392