The year 2015 has ended and 2016 brings… the dawn of a new era?? Property ‘gurus’ are once again offering their ‘expert’ predictions based on surveys and a study of property history resulting in many conflicting and not so conflicting conclusions. After toiling through many property reports and news, a short, sweet and somewhat summarised version of the 2016 property outlook is as follows.

But first, a flashback on the year 2015 and its property concerns.....

2015 Property Flashback

- GST implemented on property purchase on 1st April 2015 resulting in landfall property sales pre-GST and a wait-and-see attitude post-GST

- Tighter loan requirements resulting in high loan rejections, mostly affecting loan applications for medium cost developments

- Slowdown of sales for mid range developments

- Postponement of launch for many new projects as developers wait for market to improve

- Affordability issues from genuine home buyers

- Inflated property prices

- The 153,000 affordable PR1MA homes are definitely insufficient with a total of 1,016,000 applications as of July 2015

Conclusion of 2015

- A slow, soft and sluggish property market

A New Beginning of 2016

And so the curtains drew to a quiet close on the property market in the year 2015 to celebrate the coming of 2016. As per property discussions and opinions, there are a number of conflicting predictions and many more that concur. But the one factor that all the analysts agree on is that 2016 will be a continuation of the market slowdown.

On Opposing Sides - The Pessimist

2016 estimated to be another flat line year for properties

The Ringgit continues to depreciate and the uncertain economical climate continues to play havoc on buyer and investor sentiments. This may just result in better property deals in 2016 with sweeter packages for first time home buyers. Read that as even more freebies with free air-conditioners, branded kitchens and awesome bathrooms, rebates, discounts, free legal fees and free MOT fees in form of “moving in bonus”, perks you won’t get when the property market is thriving! Some developers are even offering a choice of furnishings now, whether the buyer wishes for a “lighter scheme”, “darker scheme” and even their own choice of wardrobe from the developer’s catalogue! Utter bliss…

An oversupply of homes in lieu of weak investor sentiments

Only 54% of total properties purchased are from genuine home buyers; which leaves the other 46% for investors. With the soft market sentiments and slow sales movement with a purported oversupply in the mid-range and high end developments, developers may just start coming up with even more attractive packages to ensure all their goods are sold. A major plus point for genuine home buyers.

A better rental market; depending on which side you’re standing on

As the market gets desperate and property speculators who lack holding power struggle to make ends meet, rental prices of properties are speculated to drop as owners compete to rent their units out for the extra income that will help pay down their property loans. Add on an oversupply of units for rent, rental prices are expected to take a dive. Want to rent a newer, bigger and better home? 2016 may just be the year for you.

Source: Savills Research

Property sales still expected to be slow

The year 2012 saw a drop of 6% in property transactions in the market and 2013 saw a drop of 7%. 2014 continued to slum with sales volume dropping by 8%. The numbers for 2015 are unconfirmed yet, but the total transaction volume was said to have further dropped in 2015 as reported in a press conference in November 2015. Despite the volume of property transactions reducing, it was reported in Q4 2015 that the value of the transactions have increased. Read that as the middle income bracket cannot afford the price of properties anymore, but the high income bracket have continued with their purchases of high end properties anyway.

2016 is expected to see a further decline in property transactions. Because of this, everyone is harping on how the market “glut” and slow property market is a bad thing. But is it really a problem, or are these sentiments coming from only a select market of buyers? Read on to find out…

Property prices still inflated but inflation rate is slowing down

As per NAPIC’s report:

- 2015 Q1: The Malaysian House Price Index increased by 4.1% in Q1 2015P relative to Q1 2014.

- 2015 Q2: The Malaysian House Price Index increased by 5.9% in Q2 2015P relative to Q2 2014

- 2015 Q3: The Malaysian House Price Index increased by 5.4% in Q3 2015P relative to Q3 2014.

As per Global Property Guide’s report:

Subsale properties make for a good buy

The subsale market for properties has long been unexplored grounds because of the harder entry requirements - read that as insufficient funds for lawyer fees, downpayment, assessment fees, etc. Well, good news for those who have the funds and want to get their dream homes second hand. The subsale section of properties have fallen in price by up to 15% in 2015 due to the softer market demands. Bad for flippers, good for keepers!

Misery of miseries, the property market in 2016 is just as gloomy and overcast as the previous years. But every cloud has a silver lining, so let’s take a look at the silver linings of the 2016 property market.

On Opposing Sides - The Optimist

Looking for your 1st home? 2016 may just be the year for you

Property prices are somewhat stable and not likely to take a hike anytime soon (as also opined by some developers), and may also possibly stagnate in the near future. Choices are rarely as aplenty as it is now with the slow market sentiments, and developers are sweetening up their deals diabetic-ally to make their sales report look good; they need to keep their shareholders happy after all. So buying your first home? Keep your eyes peeled this year. Need help making your choice? Get help here 

Long term property investment? Start now.

Are you young and savvy with a pocket full of money (or not) and want to make a long term investment in property? Now is the time to dig in. According to studies based on historical research, property prices follow a cycle. 2016 may be the dark of the ocean for the property market, but property prices are expected to start picking up in 2017 or 2018 and reach its peak again in 2019 or 2020. All new developments take between 3 and 5 years to complete, so getting a newly launched project this year is your best bet at making a quick buck four or five years down the line.

Stabilising property prices and ample choices

Really, really want a home but your cash is only coming in in a few months? Fortunately, developments are aplenty and prices of property are stabilizing so you won’t lose out too much if you buy a property in the beginning of 2016 or end of 2016. Prices of property may in fact continue to be stagnant until 2017.

So every cloud does indeed have a silver lining; and whether you can see the silver lining of the property market in 2016 or not depends very much on whether you are the buyer or seller; especially if you are a seller losing your holding power. But every dog has its day, so if you are facing too much difficulties, try refinancing your home or letting it out at a lower price to partially cover your loans and the day will come when your efforts pay off. Need help refinancing? Read this article about The Ultimate Guide of Refinancing 

Sharks will appear where there is blood, and in lieu of our weakening ringgit the Malaysian property market holds much appeal for international high risk appetite investors. So let’s see what they see in us.

Influx of High Risk Appetite Foreign Investors in lieu of Weak Ringgit?

Weak Ringgit advantageous for foreign investors

The Malaysian Ringgit has always been one of the weaker currencies in Asia, especially when compared to countries such as Hong Kong, Singapore and Japan. This is especially true in the current uncertain political climate which has further weakened the Ringgit, making it even easier for foreign investors to enter the market.

Malaysian properties considered ‘cheap’

Due to the epic lack of land in countries such as Hong Kong, Singapore and Japan, prices of properties in those countries have always been astronomical with an average 500 sf studio apartment in Hong Kong selling for approximately HKD10 million. Add on their very much stronger currency as compared to the Ringgit, it is with little wonder why they view property investment in Malaysia as child’s play.

Malaysia Top 3 Favourite Retirement Country

Weak Ringgit, comparatively lower cost of living, nice tropical weather. Malaysia happens to be a favourite retirement destination for retirees from colder countries, and developers are beginning to recognise the potential market and have answered with corresponding developments. Awesome retirement homes anyone? Get your fill here! 

Government control on foreign buyers

Thanks to the Malaysian government’s restrictions, locals will not be ousted by foreign buyers due to the restrictions the government has placed on foreign buyers. Some of the rulings include a veto on foreigners purchasing Bumiputera units, and a prohibition on developers that stops them from selling more than 10% of their non-Bumiputera units to foreigners.

There are also price restrictions where the minimum price cap differs from state-to-state and even areas. However, the general consensus is that foreigners are only allowed to buy properties with a minimum price tag of RM1 million. For commercial and industrial properties, the minimum price cap is RM3 million.

With government consent selected areas may have differing terms for foreign buyers, where the mixed development of D’Pristine @ Medini Iskandar is not subjected to the price cap at all. In Penang the price cap for residential properties stand at RM1 million on the mainland and RM2 million on the island, with an added 3% levy fee on all properties in addition to the existing RM10,000 application fee for individuals and RM20,000 for corporations.

Conclusion

All the reports and analyses for the 2016 property outlook boils down to a few points:

- The market will remain soft

- Sales will remain slow

- Inflation rate for properties is slowing down (excellent!)

- This is a bad year for flipping properties…

- … but is a good year for buying your first home or a long term investment

- Subsale properties are a good buy this year

- Rental rates are going to drop this year

- Property sales packages are likely to become more attractive this year

- The slow market will only affect those with no holding power

- Loaded money-happy investors are unaffected and will probably buy even more properties this year in lieu of all the fantastic deals

(Written by: Diane Foo Eu Lynn, 15th January 2016)

You are a pessimist or an optimist??

Soft and those properties which are just completed and were bought at Discount or DIBS scheme would face the tougher time ahead for 2016..newly completed strata properties will be hit badly this round ...

There are auction sales for those properties just completed and the auction price and the DSP almost half...

there is 1 at cyberjaya, 870psf DSP, auction 450psf...

what is DSP? is it discounted selling price?

can provide details of the auction??

Possible to reveal more details on the Cyberjaya, 870sf DSP? thanks.

I see more bloodbath coming. Oil price is the first crash of the every other crash which will follow behind.

Some see opportunity during crisis; some sees bleak future during crisis.

There is always both sides of the coin...

As Warren BUffet says, "Be fearful when others are greedy and greedy when others are fearful". :)

Market not nough liquidity for stocks, since Foreign money keep flowing out.. Bank Negara reduced SRR to ensure enough credit in the market, to bouy up the stock market. Credit will continue to be tight, and with downturn in economy, just wait for the bottom out and crash only buy a property. Best time is when it crash, you have enough money in your pocket to buy. Wait till that time.

That's why people said cash is king during crisis...

A lot of comparison, compare KL with HK, Singapore, Bangkok and Jakarta prices.. . The problem when i look on a comparison is... why would a buyer want to know what other countries are charging for the properties. They are buying in Malaysia, and not Singapore. It's at most, telling foreign buyers that, its better to buy in Malaysia, and not the other countries. Each countries have their own issue, land scarcity, bad or good infrastructure, gross earnings, legal requirements, businesss cost and loan requirements, ect ect. Hence it's actually quite useless to compare with other countries..and the final statement is.. in Malaysia it's considered "cheap"...... what a stupid comparison.

Comparison is a main method for valuation. A lot of things might be different in different countries, but it serves as a benchmark (though it is very rough) on where our properties stand vs the rest of the countries. Foreign investors will find those info useful for them.... 

There's not enough liquidity in the market now, meaning not enough credit. Banks can reduce their SSR, to increase liquidity to help the stock markets as foreign credit is leaving the country. BR & BLR  rates will not fall. Banks will be squeezed to give out loans, because they dont have enough liquidity. Remember Bear Sterns, Lehman brothers, Fannie Mae, Freddie Mac? .. If no one is buying properties, because the banks are squeezed,... which will fall first? Banks or properties? 2016 will have a grim outlook indeed. Reality will hit hard, and lets see how Bijan works this out. Once Malaysia bank governor retires, all hell's will break lose.

But I read in the news that day that she's already kinda set up a roadmap for her 'descendants'. So hopefully should be ok... and she also got that law passed where gomen cannot interfere with bank negara stuff.... let's see how well her plans holds up.

Had a chat with a friend who has been in the property industry for more than 25 years. He mentioned that what the industry is experiencing now (the slow down) is not as bad as the situation in 1997-98 during the AFC... a consolation!!!

@ppnnkk2011, yes I agree with your friend. It's actually not as bad. In fact, people (home buyers, tenants and investors) are still buying.

A slowdown is definitely healthy to set base for the next bull run. But surprisingly the slow down is not that bad even with DIBS projects. People are just leaving their unit empty without doing anything. Guess Malaysian property buyers are all pretty loaded.

@danielfoo, sometimes it's could also be because they can't get it rented out, due to over supply, etc

I think this year will be started to picking up for a bit although the markets now are still quite quiet. 

@dylancheah, I think it will only pick up maybe next year onwards. However, during the slow time, that's when investors / buyers should buy, because you enjoy all the freebies and rebates with developers on new properties and higher negotiation power with owners on subsale. During good times, it's almost impossible to squeeze the developers / sellers / owners. 

Then if buy now, can keep for few years when it appreciates, during the good times, that's when you let go at a high price. 

I've actually came across owners who bought a property during good times and now desperate to let go during bad times. Barely making any profit. 

Agree, timing must be right. U must also have the ability to hold...

2016 Property Market, A tough year ahead?! 

 Would it be Crash/Slump in 2016? A crash is marked by sudden sharp drop in prices and a sharp rise in interest (currently about 4.6% vs 14%+- 1998). Less likely to happen. Landed properties should be holding on or less affected. The main concern is the holding power and income sustainability of those investors who the entry level are around 3-4 years back.

Many industry experts said and commented in recent months, the property prices are expected to experience a “moderate drop” or "flat demand" this year as demand dwindles and auctions of foreclosed properties add to the existing oversupply. Global economic situation is expected to worsen for 2016 to 2017. Many lay-off amongst the big companies too.

Recent discussions and topics with property-related professionals and fello friends working as estate agent, property market seems to heading to a downturn in a great speed. Undeniably and it is a factual fact now. The most-hit would be those newly completed stratified properties (if "inflated-price")) as it is most developed since last couple of years.

Currently, some newly completed developments' prices are almost heading back to "Square One" or even lower if the developer's selling prices were "over-priced". DIBS package did give a bad consequence now to many property investors.

DIBS (Developer Interest Bearing Scheme) seems to be a "betting bonus" for many investors or those young or group-investors or "property-GURUS" or property-flippers. Developers' discount and free package did play the nasty roles too.

Auctions of foreclosed properties are also getting less attentions from Bidders/investors. Bidders are staying away from auction properties market. Banking halls are getting lesser crowd. Retailers are also facing tough time now. GST did played its part but at the wrong side.

2016, a wrong timing for property investors, time will tell or is telling now? A drop is expected. A double-digit decline? The bad news is, the decline is happening now and generally 5-15% have been recorded. Anticipating 2016's 2nd & 3rd Quarters will be very challenging and tough months for all the investors. Hopeful 4th quarter would be at the bottom out.

Or 2016 should we considered as Property-Price-Correction-Year? Every property circle, there will be 1 to 2 years for property price correction. Correction should be considered healthy for our property market in the future.

Even when time is bad, people buying too. Time to grasp a good property now? Yes, if you can get below market properties. A double-digit lower? A good buy always if the location is good. Just study the current trend of Auction data when free, it would tell the actual fact of the "most probably price" or "most probably PSF" for a location.

Hopefully, the property market 2017 would return to its good track soon. Current government fiscal policies are hopefully making extra injections to our economic and at the end provide a good year ahead to all of us.

Wow, super informative. Thanks for sharing, @propertyX  :-)