The post-pandemic property sales in 2022-2023 have been strong, even after taking into account effects of pent-up demand (that would taper off) — y-o-y growth remains positive in 1Q2024. Developers have also been generally more disciplined in launching new projects. As a result, unsold stock across the country fell on the back of the recovering demand and fewer housing starts (see Chart 1). And home prices are rising now at a faster clip across all market segments (see Chart 2) — not just because of stronger demand but also due to rising costs, including wages.
The Malaysian property sector recovery remains intact based on the most recent available statistics. Residential property sales (by value) are rising nationwide, on the back of increases in both volume demand and prices, and — this might come as a shock to many — underpinned by improving home affordability, contrary to popular misconception that is often perpetuated by the media and even government authorities. At the same time, unsold units are decreasing, boosting homebuyer confidence in the sustainability of this recovery and overall sentiment for the sector. All the data are supportive of the property sector’s turnaround after years of sluggish demand and lacklustre outlook following the Developer Interest Bearing Scheme (DIBS) bubble burst.
To briefly recap, the DIBS scheme, introduced in 2009, allowed developers to absorb all the interest costs on mortgages during the construction period. The resulting “free holding cost” during the construction period for homebuyers drove massive speculative activities — buyers bought properties with the intention to flip them on completion — causing prices to surge and making homes rapidly unaffordable. The DIBS scheme was abolished in Budget 2014. That led to a sharp contraction in demand — the number of transactions fell — amid incoming supply. Unsold units piled up, exerting downward pressure on home prices and eroding buyer confidence. Home prices became stagnant, and even fell in some market segments, including high-rise and high-priced properties. It took years for the property market to rebalance and regain its footing. Demand did not start recovering until around 2018 but was interrupted by the Covid-19 pandemic.
