Sulaiman Saheh, Director of research, Rahim & Co International
Contributed by Sulaiman Saheh
The Malaysian property sector in 2024 was generally characterised by a positive growth momentum in numbers, juxtaposed with a mixed market sentiment amongst buyers facing rising costs challenges and global economic uncertainties. Alongside the number of transactions and their cumulative value across all sectors nationwide growing by 6.2% and 14.4% year-on-year for the first nine months, a gradual growth in retail spending was estimated. According to reports, Retail Group Malaysia (RGM) is forecasting 2024 to achieve 3.9% annual retail spending growth, higher than the 2.2% expansion in 2023. Coupled with strong investment activities and improving exports underlining the nation’s GDP growth, there are promising signs for 2024 to end on a high note and pre-empting a positive start to 2025.
Across all categories of the property sector at the national level, market transaction activities have increased for the first nine months of 2024. As the biggest sector in terms of transaction numbers, the residential sector grew by 4.9% in volume and 6.9% in value to 192,484 transactions worth RM78.17 billion. Affordable housing continues to be the main agenda as the government seeks to improve the affordable housing supply nationwide. The federal government had launched seven Residensi Madani projects and a new requirement was made for all future housing projects to have an allocation for affordable Madani units. Developers on the other hand, despite facing a more thriving market, are still dampened by rising prices and a surplus environment. Priority is given to clearing up unsold stock over launching new ones which is reflected by the gradual lessening numbers of overhang stock. The third quarter of 2024 saw overhang dwellings standing at 44,057 units worth RM31.58 billion, a drop of 10.8% and 14.4% year-on-year in stock and value respectively.
Still spoilt for choice
On the commercial side, the office and retail segment remain in a competitive environment with tenants still spoilt for choice. This fuelled tenants' movements as what has been coined as a flight to quality to newer commercial buildings. Good tenancy and sustainable foot traffic are crucial to a shopping mall or office building’s longevity. Office demand in prime locations remains steady while others face downward pressure in occupancy as a hybrid workstyle lessens the need for exclusive office spaces. Shopping malls continue to be a place of more than just retail therapy, but also a place of leisure, fun experiences and social gatherings. Having aesthetic interior designs, exterior features and outdoor spaces add further appeal to mallgoers and giving an advantage over others. For the less glamorous counterpart, the industrial property segment, although it showed some mixed performance across the various states, achieved an overall growth of 6.5% in volume and 22.8% in value transactions; putting the segment’s nine-month performance at 6,320 industrial transactions worth RM20.67 billion. While logistics and warehouse spaces are still on the radar, developers are taking a more future-proof approach to new industrial parks to meet the demand of current and future industrial players, setting Malaysia up as a strong regional industrial hub with an emerging focus on data centres.
As the year ends with good prospects and positive notes, some others remain unravelled and pending for 2025. Having conceded Budget 2025 to offer just a handful of proposals pertaining to the property market – in order to take a more holistic approach to bringing up the economy as a whole – several decisions and announcements have been deferred to 2025.
New Acts
The proposal for a Residential Tenancy Act (RTA) in Malaysia, first introduced in 2019, has yet to be enacted despite ongoing discussions. Malaysia remains one of the few countries without dedicated legislation for its rental market, leaving it unregulated and vulnerable to issues like arbitrary rent increases and disputes. With house prices rising, more Malaysians are turning to renting, highlighting the need for clear, comprehensive legal protections for both tenants and landlords. Currently, tenancy relationships are governed by basic laws like the Contracts Act 1950 and the National Land Code 1965, but these offer limited protection. The Rent Control Act, repealed in 1997, previously addressed rent increases, but since then, there has been no direct rent regulation. Advocacy groups argue for an RTA to clarify issues like rent control, security of tenure, eviction processes and dispute resolution mechanisms. The introduction of an RTA would aim to establish a fairer, more structured rental market. Proposals include a specialised tribunal or streamlined court process to resolve disputes efficiently. As urban rental markets grow more competitive, the formalisation of an RTA hopes to address these gaps and improve housing conditions for all.
The year 2024 saw debates and discussions happen with regard to the proposed Urban Renewal Act (URA) by the Ministry of Housing & Local Government (KPKT). Those in support seek clearer guidelines on how to revive and redevelop long-neglected buildings for better future use. Those in opposition fear the threat it poses to the rights of a property owner, putting them at a disadvantage against the majority. While many recognise certain areas and developments in Malaysia’s major cities are in dire need of a revival intervention to create new urban life out of the old, it is equally important to find a balance between enabling development efforts for the betterment of a city and the fairness and welfare of the existing property owners and residents.
Guidelines as a focal reference
This is indeed of paramount importance for not just nurturing a vibrant property market but also an equitable one. KPKT introduced the Urban Renewal Implementation Guidelines (GPP PSB) back in January as the focal reference for developers and stakeholders keen on urban renewal projects. Following next would be the tabling of the URA at parliament which, according to KPKT, is expected to happen in March 2025. The industry remains in wait for what will come to fruition once that happens. Pre-empting this, KPKT has identified 139 potential redevelopment sites within Kuala Lumpur that developers can bid for. These sites will vary in their respective redevelopment extent based on four scopes; i.e. urban redevelopment, urban regeneration, urban revitalisation and urban conservation. As the proposed URA must take into account the legitimate interests of all owners, including the opposing owners, a more palatable approach that offers a genuine win-win solution is needed - so that it will not be viewed as a less-than-equitable land grab.
Equally important to the pending new items are the pre-existing dilemmas and issues faced by the property market. Always at the forefront, affordability remains in the spotlight and despite the promising market growth projections, bridging the gap between high-end and affordable housing remains a key challenge. To achieve this, inclusive urban development and planning, as outlined in government policies, must be prioritised. The focus will be on affordable housing, pricing strategies and mechanisms to assist lower and middle-income groups in homeownership, supported by various programs and financial aid. Further policy enhancements and incentives are expected to maintain investor interest, with programs like MM2H and the Malaysia Premium Visa Programme (PVIP) designed to attract foreign buyers, while assuring the needs of local citizens are not compromised. Major public infrastructure projects, especially in transportation and new incentives for special economic zones are also expected to stimulate the property market.
Although confidence in the Malaysian property market is gradually growing, addressing past challenges remains critical. Ongoing evaluation and a collaborative, multi-stakeholder approach are needed to create a more balanced, inclusive and sustainable market. This will help ensure that Malaysia's property sector remains vibrant and equitable for all citizens. While some matters have been resolved and wrapped on a good note, others still have some ways to go and continuous engagement and collaboration between public and private parties will eventually lead to the implementation of practical, fair and business-friendly policies and initiatives.
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