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Subdued house price rises in Malaysia

Courtesy of GlobalPropertyGuide

House prices in Malaysia have slowed. In Q3 2016, Malaysia's national house price index rose by 5.36% y-o-y (3.81% inflation-adjusted), slightly lower than the 7.35% y-o-y (4.61% inflation-adjusted) price increase during the same period last year. This was the lowest increase since Q3 2009, based on figures from the Valuation and Property Services Department (JPPH).

The national average house price was MYR 334,736 (US$ 75,390.82) in Q3 2016.

The state of Kedah had the highest annual price increase with an 8.8% increase (7.2% inflation-adjusted) during the year to end-Q3 2016. It was followed by Selangor (7.5%), Negeri Sembilan (6.8%), Johor (5.5%), Melaka (5.5%), and Kuala Lumpur (5.1%).

Other states saw moderate house price hikes including Pahang (4.2%), Sarawak (3.6%), Pulau Pinang (3.4%), Terengganu (3%), and Perak (2.5%). House prices in Perlis and Sabahremained unchanged from the previous year. On the other hand, house prices in the state of Kelantan slightly fell by 0.4% (-1.86% inflation-adjusted) during the year to Q3 2016.

The most expensive housing in Malaysia can be found in Kuala Lumpur, with house prices averaging around MYR 772,126 (US$ 173,902) in Q3 2016. Perlis, on the other hand, had the cheapest housing, with an average price of MYR 153,472 (US$ 34,566).

By property type:

  • Terraced house average prices rose by 5.6% (4% inflation-adjusted) to MYR 299,012 (US$ 67,345) during the year to Q3 2016.
  • High-rise residential properties' average price rose by 6.6% y-o-y (5.1% inflation-adjusted) to MYR 320,782 (US$ 72,248).
  •  Detached house average prices were up by 3.7% y-o-y (2.2% inflation-adjusted) to MYR 560,987 (US$ 126,348).
  • Semi-detached house average prices increased by 5% y-o-y (3.5% inflation-adjusted) to MYR 500,943 (US$ 112,825).

The housing market is expected to continue slow growth in 2017, due to concerns about the slowing economy and the ringgit's weak performance, among others.

"This year (2016) has been a subdued year and we expect the same in 2017," says Knight Frank Malaysia's Managing Director, Sarkunan Subramaniam. "Developers will face lower demand whilst implementing strategies to attract and improve sales to counteract the lower consumer demand due to the current state of the economy.

"On the investment front, vendors have more realistic expectations and purchasers are looking for bargains, therefore we expect to see more sales activity. We anticipate transactions in commercial properties and investment properties to be priced 10% to 20% below perceived market value with realistic and increased yields," Subramaniam added.

The stamp duty rate for properties worth more than MYR 1 million (US$ 225,759) will be raised from 3% to 4% starting January 1, 2018. While this is expected to reduce demand, Knight Frank noted that this might actually "boost sales of million ringgit homes before 2018".

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