Malaysia’s property market maintained its healthy trajectory in 2Q23 as residential property transaction grew 5% y-o-y and 13.5% q-o-q while residential property loans grew healthily by 6.8% (vs 6.9% in 2Q22). This is despite the sharp increase in the Overnight Policy Rate (OPR) from 2% to 3%, reflecting resilient domestic demand. Meanwhile, 2Q23 house price index moderated to 2.2% (vs 4.8% in 1Q23, 2.6% in 2Q22), a moderation which is largely expected after the strong recovery over the past one year.
Inflection point for supply overhang. Residential overhang has improved considerably over the past one year (-23% y-o-y, -2% q-o-q) to reach 26,286 units in 2Q23 which is the lowest since 2018. More importantly, the improvement in overhang has also been witnessed in the high-rise segment, though it remains elevated by historical standards. This could mark an inflection point for high-rise properties which have been plagued with oversupply for the past few years. We are optimistic that the reduction in supply overhang is set to pave the way for better growth prospects for developers going forward.
Bursa-listed large developers generally recorded commendable sales performance in 2Q23, especially in the landed properties segment where booking pipeline remained strong. Given the expectations of peak interest rate and strong economic growth as projected under the 12th Malaysia Plan Mid-Term Review, Malaysia’s property sector is likely to maintain its gradual recovery momentum.
We are hopeful the robust employment market with record high labour participation will remain supportive of the property market. We are confident that landed properties remain the bright spot in Malaysia’s property market due to a balanced supply-demand dynamics. We believe township developers such as Eco World, Sime Darby Property and IOI Properties could be the largest beneficiaries of the sustained recovery for landed properties.