REHDA INSTITUTE CONFERENCE

Transcription

1 Residential Property Trends: Where Is The Demand And What Products To Sell In 2018? 3 May 2018

2 A fish out of water to a water out of fish. Is it time for a faithful leap? 2

3 Volume Value (RM Million) MALAYSIA S PROPERTY MARKET OVERVIEW OVERALL MARKET PERFORMANCE The property market has been on minimal decline in recent years since Q 2017 registered highest transaction volume and value in the whole of Total Transaction Volume and Value 400, , , , , , ,000 50, Q 20152Q 20153Q 20154Q 20151Q 20162Q 20163Q 20164Q 20161Q 20172Q 20173Q 20174Q , , , ,000 80,000 60,000 40,000 20,000 0 Source: NAPIC, 2017 Volume Value 3

4 Volume Value (RM) MALAYSIA S RESIDENTIAL SECTOR OVERVIEW RESIDENTIAL MARKET TREND DIBS No DIBS RPGT 0-30% RPGT Exemption Period RPGT Flat rate 5% 2012 RPGT 5-10% 2013 RPGT 10-15% 2014 RPGT 15-30% 2015 GST 6% 300, , , , ,000 50, , , , , , , ,000 50,000 0 Residential Volume Average Transacted Price Source: NAPIC, 2017; CBRE WTW Research,

5 Units MALAYSIA S RESIDENTIAL SECTOR OVERVIEW RESIDENTIAL TRANSACTION BY PRICE RANGE IN 2017 Residential Transactions 80,000 70,000 60,000 50, % 82.6% 40,000 30,000 20,000 10, % 27.6% 19.8% 13.1% 4.3% < RM150,000 RM150k -RM300k RM300k - RM500k RM500k - RM1 mil > RM1 mil Source: NAPIC,

6 RESIDENTIAL OVERHANG IN 2017 By Type By Price Condo/Apartment 38.4% 24,738 units 2-3 Storey Terraced 24.7% 2-3 Storey Semi-D 9.9% > RM1,000, % RM500,001 - RM1,000, % RM15.6 billion RM300,001 - RM400, % Single Storey Terraced 2-3 Storey Terraced Single Storey Semi-D 2-3 Storey Semi-D Detached Townhouse Cluster Low-cost House Low-cost Flat Flat Condo/Apartment < RM50,000 RM50,001 - RM100,000 RN100,001 - RM150,000 RM150,001 - RM200,000 RM200,001 - RM250,000 RM250,001 - RM300,000 RM300,001 - RM400,000 RM400,001 - RM500,000 RM500,001 - RM1,000,000 > RM1,000,000 Source: NAPIC,

7 MALAYSIA S RESIDENTIAL SECTOR OVERVIEW STOCK SUPPLY NO OVERSUPPLY Annual growth in population 390,000* New houses needed 97,500 units/year** Annual completion 2017 = 94,198 units WHY OVERHANG? Notes: * Based on population growth rate of 1.3% on population of 32 million as of 2017 ** Based on average household size of 4 7

8 MISMATCHES IN THE MARKET

9 3M IN RESIDENTIAL MARKET M1 PRICE MISMATCH M2 LOCATION MISMATCH M3 PRODUCT MISMATCH Bank Negara estimated average Malaysians can afford houses priced RM250,000 and below. Of new launches in 2017, 73.3% was priced beyond RM250,000: 50% was priced between RM250,000 and RM500,000 Almost a quarter was priced above RM500,000 (23.3%) RM1,000,001 & above 2.7% RM500,001 - RM1,000, % RM250,001 - RM500, % New Launches in ,542 units Source: NAPIC, 2017 RM100,000 & below 4.3% RM RM250, % 9

10 Residential properties in Kuala Lumpur and Selangor considered as unaffordable, with median multiplier of 5.4 and 4.0 respectively. Note: Median Multiplier classifications 3.0 and below: Affordable : Moderately unaffordable : Seriously unaffordable 5.1 and above: Severely unaffordable Source: Khazanah Research Institute,

11 3M IN RESIDENTIAL MARKET M1 PRICE MISMATCH M2 LOCATION MISMATCH M3 PRODUCT MISMATCH Lack of amenities and facilities, accessibility and connectivity issues due to location dampen reception towards certain locations. Some areas within major cities which are lesser developed also experienced higher incidence of overhang. Top 3 districts with most overhang, 2Q 2017 Kedah 3,783 Kuala Muda Baling Kulim Source: NAPIC, 2017 Units % 3, Top 3 districts with most overhang, 2Q 2017 W.P. Kuala Lumpur 929 Seksyen Batu Mukim Setapak Units % Top 3 districts with most overhang, 2Q 2017 Selangor 3,713 Petaling Gombak Hulu Langat Units % 1,

12 3M IN RESIDENTIAL MARKET M1 PRICE MISMATCH M2 LOCATION MISMATCH M3 PRODUCT MISMATCH Some SOHOs/studio units available in the market are shoebox units. Inadequate unit size and overly high density not suited for family living and not ideal for longterm settlement. In the case of public housing, poor building quality and management cause deterioration in living quality and raise concerns over sustainability of the schemes. 12

13 THE NEED TO UNDERSTAND THE MARKET DEMAND What type of property is undersupply? Where is the gap in the market? Stop building, let the market absorbs first? Where are the preferred locations? Are they supported by public transport/connectivity? What are the optimum sizes for different types of property? Squeeze on profit margin to match the price with affordability in exchange for better sales? Who are the target groups? What is their price expectation? Inadequately high density put buyers off? 13

14 What about renting?

15 RENTING IS A SENSIBLE OPTION WHEN AFFORDABILITY IS A CHALLENGE Income and house price mismatch requires long-term correction in the market and in the economy as a whole Renting takes up lower financial commitment and presents as an easier and immediate access to accommodation UNDER-UTILISATION OF PROPERTY If there is abundance of vacant units or aged properties, then it may be worthwhile to consider transforming into rental use SOFT MARKET Rental yield becomes more attractive when capital gain is slow in a fatigue market VIBRANT POPULATION AND DYNAMIC LABOUR MOVEMENT Renting may be preferred in major cities/cbds where the population is presumably more mobile and consists of higher number of expatriates with the support of open door policies on expatriates employment RAPID INCREASE IN HOUSING DEMAND Housing demand grows in tandem with urbanisation and population growth, putting up more houses for rental is a quicker response RE-ADAPTATION Conversion of vacant commercial units/shopoffices into residential use (e.g. studio office) 15

16 OTHER MATTERS TO LOOK INTO Reduce red tape and speed up the planning process Extra density allowance Tax incentives (e.g. 50% tax exemption on rental income up to RM2,000 in Budget 2018) Adjusted tax system, avoid overly generous capital gains tax and prevent negative gearing Comprehensive regulatory framework to protect tenants and landlords to address challenges of property maintenance, tenants obligations. risks of rent default and any other related concerns Check-and-balance system/third party intermediary (e.g. Rental Bonds Office in Australia) Public-private partnership on land release. Shared ownership between developers and government. Construction cost is a constant, but land prices and taxes can be made cheaper Transparent and supportive planning (e.g. development of rental housing is among the strategic considerations in local panning in London) No erratic policy changes that would dampens investors confidence and trust Avoid excessive control such as rent control that would discourage investment activities 16

17 PERHAPS IT S TIME FOR A PARADIGM SHIFT Home-ownership is not the be-all and end-all Moving away from the typical Asian mindset, absence of homeownership does not imply welfare deprivation. The ultimate priority is to have a shelter over one s head, be it rented or owned. 17

18 BUILD-TO-RENT

19 BENEFITS OF BUILD-TO-RENT DEVELOPERS/INVESTORS Longer lease term offers steady and stable revenue in the form of rental Attractive to large institutional investors such as pension funds who need reliable recurrent returns 19 TENANTS Longer lease term offers security Quality assurance as purpose-built homes are professionally managed and specialised for rental Catered for lifestyle of millennials or young family units who seek for onsite services and facilities

20 RENT-TO-OWN

21 RENT-TO-OWN IN MALAYSIA Rental housing by PR1MA for up to 10 years with option to purchase at the end of tenancy Eligibility: Successful PR1MA applicants who are unable to secure a home loan Option to purchase: Offered in the 5 th or 10 th year of tenancy at a price set by PR1MA RTO scheme by Maybank Islamic Bhd for the general public, currently available for Klang Valley properties Eligibility: Must not have more than 1 home financing at the point of application and household gross income of RM5,000 and above Option to purchase: Available after 1 year of renting at a pre-agreed price Option to sell: Available after 1 year of renting. To sell the property at market value. Gain between the pre-agreed price and the sale value goes to the tenants fully Option to abort purchase: Allowed if after 5 years of renting at no cost or continue on renting 21

22 PROS AND CONS OF RENT-TO-OWN Longer lease term guarantees accommodation for tenants Certainty in rent increment, usually stated in a contract Lock in property price for future purchase Allow time for tenants to build up financial capacity, save for down payment and accumulate credit score history Easier entry and pathway to house ownership with low initial financial commitment Opportunity to assess the property and its surrounding prior to purchase Appeal to genuine buyers 22 May be more costly depending on the rental rate and contribution to option money May incur a big financial loss to the tenant if property purchase is aborted, forfeiture may be exercised Challenges in property and tenant management for landlords Recommended to prospective buyers. Sign up if you are confident to buy. Understand the contract: Rental schedule Purchase price setting Contribution to option money Forfeiture/penalty if purchase is aborted Conditions for lease termination

23 CO-LIVING

24 THE CONCEPT AND BENEFITS OF CO-LIVING Co-living is a form of shared living where individuals under one roof share the space, necessities and responsibility as a community. Co-living could be managed by a professional host. Cost-sharing and cost-saving Allow interactions, support and companionship, suitable for bachelors Promote sense of belonging and responsibility to a community Changing residents Privacy and security Trust and accountability Living condition, not adoptable by smaller-sized units Reality in Malaysia Bounded by gender, race, religion and cultural practices Asians tend to have closer family ties and live with extended family 24

25 THE ATTRACTIVENESS OF CO-LIVING Appeals to young professionals and new start-ups/entrepreneurs. Could be an extension/progression of co-working. An integration of live, work and play in daily life which millennials are more looking forward to. Suitable for short-term accommodation for expatriates. Ala student accommodation for adults which is filled with interactive and engaging environment. 25

26 Singapore Hmlet is responsible for rental collection and providing co-living services to tenants Types of rooms and rental rates: Master Average SGD1,400-2,400 / month Regular Average SGD1,300-1,700 / month Pocket Average SGD1,000 / month Established in 2016 Operates co-living spaces in Singapore and Tokyo Minimum rental period of 3 months before moving into month-to-month basis Monthly payment = Rental + Services Charges Features and services: Weekly and monthly communal activities such as workshops, city discovery, games, outdoor activities and networking sessions Housekeeping and cleaning services Payment for utilities On-site facilities such as swimming pool High-speed internet Fully-furnished, ready to move in set-up 26

27 EXAMPLES OF CO-LIVING AROUND THE WORLD Country China Hong Kong Singapore India United States United Kingdom Netherlands Co-living Space YOU+, Vanke Port Apartment, ZiRoom Campus Hong Kong lyf Fella Homes, CoHo Stayz, Wudstay, Ziffy Homes WeLive, Common, Ollie, Pure House, OpenDoor The Collective, Roam Zoku Source: Multiple sources,

28 RETIREMENT LIVING

29 WHAT MAKES RETIREMENT LIVING FEASIBLE IN MALAYSIA? CONSTANT AGEING POPULATION Size of aged population: 210 = 7.4% (or 2.1million) 2020 = 9.9% (or 3.4 million) 2040 = About 20% By 2020, 1.7 million aged couples could be the potential demand UNIQUENESS OF THE COUNTRY Rich and diverse culture Low language barrier Vast offerings for leisure activities with a good mix of nature and urban areas, luxury and recreational options REASONABLE LIVING COST AND QUALITY Quality healthcare and education systems Reliable infrastructure, utilities and telecommunication services Cost of living in Malaysia is relatively low by international standard OPEN DOOR ATTITUDE Foreigners could transfer their pension funds/savings into Malaysia without being taxed Foreigners could still own a property in Malaysia Visa option for long-term residency, i.e. MM2H 29

30 CHALLENGES TO BE RECOGNISED Social acceptance could take a longer time especially in Asian communities. The number of aged population has yet to make up a significant demand that would enable economies of scale to support such specialised sub-sector. Retirement living would likely need to be complemented by healthcare-related offerings, thus, proximity to and arrangements with a healthcare provider is an essential requirement of such projects. The challenge of selling retirement home is that it has to be cash-based as most retirees are past the eligible age for loan financing. In view of this, retirement living properties on rental basis hold better prospects than those on sale basis. 30

31 Where does future demand lie?

32 RAIL NETWORK Catalyst for non-landed/integrated developments in KL city centre and fringes of KL Target group; Young working adults, students who are more agile Small family units Bachelors Purpose: Self-occupation, rental Hotspots: Petaling Jaya Kelana Jaya Kwasa Damansara/Sungai Buloh Bangsar/central KL Ampang Wangsa Maju 32

33 ROAD NETWORK Catalyst for landed/township developments outside of KL city centre Target group: People who possess own transport Family units Mature-age working adults Relocators Purpose: Self-occupation Hotspots: Shah Alam (northern) Kajang Semenyih Rawang 33

34 MILLENNIALS POPULATION IN MALAYSIA On average, millennials make up 35% of Malaysian population ,697, ,570,200 Note: Millennials is defined as those aged between 20 and 39 years old in the population Source: DOSM,

35 MILLENNIALS IN MALAYSIA WHAT ARE THEIR FINANCIAL CONCERNS? High cost of living Unaffordable property prices Unable to save money Cannot afford to pay for unexpected emergencies or medical problems Not having enough for retirement Uncertain job prospects Note: Millennials in this survey is defined as those aged between 21 and 29 years old at the time of survey Source: imoney,

36 MILLENNIALS AROUND THE WORLD WHAT IS THEIR RESIDENCY STATUS? Note: Millennials in this survey is defined as those born between 1986 and 1993, aged between 22 and 29 years old at the time of survey Source: CBRE,

37 MILLENNIALS AROUND THE WORLD HOW THEY SPEND? Source: CBRE,

38 MILLENNIALS AROUND THE WORLD HOW DO THEY ADAPT? Note: Millennials in this survey is defined as those born between 1981 and 1998, aged between 19 and 36 years old at the time of survey Source: HSBC Beyond The Bricks,

39 MILLENNIALS AROUND THE WORLD ARE THEY KEEN TO OWN A HOUSE? Source: HSBC Beyond The Bricks,

40 MILLENNIALS AROUND THE WORLD WHAT ARE THEY LOOKING FOR? Source: HSBC Beyond The Bricks,

41 THANK YOU