Residential agents say 47% supply reduction to put floor under prices

PETALING JAYA: Residential prices may soon find a floor due to decreasing property pipeline, but this will not last long, according to insights released by Juwai IQI.

Juwai IQI subsidiary IQI head of bumiputra segment Muhazrol Muhamad (pix) said the 47% reduction in completed dwellings and 9% decline in new planned residential supply will reduce supply enough to limit future price declines.

“As agents, we still see sufficient activity and buyer demand to keep us busy. We have more concerns about supply. The pipeline of new supply is shrinking,” he said in a statement today.

Last quarter prices fell 2.2%, but the shrinking pipeline will put a floor under future price falls as developers are reducing the flow of new supply onto the market.

“Supply is still sufficient today, and there is still some overhang, but the pipeline is reducing, and the overhang is shrinking. “

Muhazrol stated that in the first quarter of 2022, dwelling completions plummeted 47% versus the fourth quarter of 2021 — to 13,284 from 25,074. Over the past three quarters, new planned residential supply has also dropped 36% from 26,392 units to just 16,774, a significant change from the previous trend in which new planned supply increased steadily quarter after quarter. Compared with Q4’21, new planned supply is down 9%.

“Besides reducing supply, developers are also, in some cases giving significant discounts today. As soon as they clear the units they hope to sell in the short term, you can expect these discounts to disappear,” Muhamad said.

Inflation is likely the number one factor behind developers deciding not to launch new projects. By holding onto projects, they hedge against the risk of inflation and will be able to sell them later at higher prices. However, he remarked that interest rate increases will not impact Malaysia significantly as it is still close to historic lows, which limits any potential impact on the real estate market.