Its director of research Sulaiman Akhmady Mohd Saheh said the residential market has become more polarised and as such, it is no longer accurate to assume that only affordable properties will sell while the higher-end ones won’t, as the market dynamics now depends on factors such as the quality of the product, location and target market.

“In general, affordability is still a big concern and this is primarily addressed through transit-oriented developments (TODs).

“By integrating TOD principles, developers can create units that are not only affordable but also conveniently located near workplaces, facilities and amenities.

“This approach makes it easier for people to purchase a home,” he said at the launch of the Rahim & Co Research Property Market Review 2023/2024 yesterday.

Sulaiman added that while transactions in the affordable homes segment continue to dominate the industry, there has also been an uptick in transactions for higher-end properties or those in premium land brackets, driven simply by the overall increase in volume of transactions.

“This is where the market becomes polarised, being open to any location that has strong fundamentals like good locations and good amenities,” he said.

With regards to the issue of affordability, Sulaiman said the Malaysian income level needs to be elevated.

“The income gap affects not only housing affordability but also merchandise, fast-moving consumer goods and services.

“The government’s focus in raising Malaysia’s income level to bring the country out of the middle-income trap through initiatives like the Economic Transformation Programme needs to be sustained, as it is crucial not only for the property sector but also for the general market,” he said.

The Rahim & Co Research Property Market Review 2023/2024 analyses the property market for every state in the country.

In his presentation, Sulaiman said that following the strong rebound in property market transactions in 2022, this growth momentum has seen a slight moderation in 2023, adding that it is likely to continue this year.

For the first nine months of 2023 (9M23), the total transaction volume in the local property market held steady at 0% year-on-year (y-o-y).

On the other hand, the total transaction value in the local property market increased by almost 9% y-o-y and is expected to finish off on a stronger note compared to the trend of transaction volume.

“While the official numbers for the fourth quarter of 2023 have not been released, 9M23 recorded among the highest numbers in transactions countrywide for the same period since 2011/2012’s peak point, indicating a sustained market momentum from 2022.”

He said this is coherent with the post-pandemic recovery pace which has surpassed above pre-2020 performance.

“Nevertheless, we observe a trend towards normalisation, where the rebound seen in 2022 has slowed down but remains stable in terms of growth.

“Our projections indicate that the total volume of transactions in the domestic property market for 2023 will likely be just shy of 400,000 units,” he said.

Sulaiman said of the three major property sectors, residential and commercial grew while the industrial sector saw a slight decline in volume albeit a healthy increase in value.

In terms of volume and value, the commercial sector saw an expansion of 22.3% and 24.8%, respectively.

Moreover, the residential sector continues to dominate the local property market, especially in areas bolstered by existing infrastructure, strategic locations and areas with sufficient population and amenities such as schools and workplaces.

For residential launches below RM300,000, new supply share averaged at 42% between 2019 to 2022. However, for the first half of 2023 (1H23), launches below RM300,000 posted a much smaller share at 21%.

Meanwhile, newly launched residential units between RM300,000 and RM500,000 and above RM500,000 showed an upward trajectory.

Residential units priced between RM300,000 and RM500,000 rose 37.3% in 1H23 from 30.9% in 2022, and those priced above RM500,000 went up to 42% in 1H23 from 24.7% in 2022.

Meanwhile, there has been a notable increase in newly launched residential units across two price brackets namely between RM300,000 and RM500,000, and above RM500,000.

Additionally, there was a surge in the proportion of residential units priced above RM500,000, which increased to 42% in 1H23 from 24.7% in 2022.

“This shift was propelled by market dynamics and the cost-push factor that forced developers to introduce higher-priced offerings. Additionally, deferred launches originally planned for 2021 and 2022 also contributed to this trend,” he said.

In terms of pricing for residential properties, Sulaiman said there has been a moderation in price growth, particularly notable between the figures from 2020 to 2022.

However, in 2023, there was a slight increase where prices in Kuala Lumpur, Petaling Jaya, Penang and Johor Bahru improved by about 2% to 5%, on average.

“Despite this moderated growth, prices of properties within the country generally remain unaffordable,” he said.

Looking at the median price multiple index (an index of affordability comparing median household income against the median house prices), the median terraced house price to annual household median income in Kuala Lumpur is at a multiple of 7.1, whereas in Selangor and Johor, the figure is 4.7, and in Penang it is 6.4.

Bearing in mind, less than 3.0 is classified as affordable, from 3.1 to 4.0 is moderately unaffordable, 4.1 to 5.0 is seriously unaffordable, and more than 5.0 is severely unaffordable.

He said when compared to its neighbouring countries, Malaysia’s property market still appears relatively affordable.

“For instance, in Singapore, the median multiple for the housing development board category stands at 5.3, and the median multiple jumps for Singapore’s general market for privately owned properties is 13.7.

“Jakarta stands at 9.4, Bangkok at 10.2, London at 8.7, Sydney at 13.3, and Hong Kong at 18.8.”

However, he said, property remains a highly localised market, dependent on local buyers, occupants and businesses and it relates to the affordability of the households based on their income.

“This was one of the reasons why the country’s median multiple is high. This affordability concern has also led to high numbers of unsold properties over the years,” he said.

Even so, Sulaiman said with the more stable price growth in the residential segment amid the continuous focus on affordability, developers took a more cautious approach to new launches by way of smaller-scale phases and prioritising ongoing projects over newer ones.

“This contributed to an improvement to overhang numbers, which reduced to 49,364 dwelling units (comprising residential, serviced apartments and Small office, Home office units) worth RM36.9bil as at 3Q23.

“In 2Q23, dwelling overhang stood at 51,126 units whereas it was 55,482 units a year ago,” he said.