Henry Butcher Malaysia (HBM) has just announced the launch of their annual property market report entitled “HB Perspective. Malaysia Property Outlook 2023.” The report provides a review of the property market in 2022 and presents their views on the outlook for the property market in 2023.
The Residential Sector
As part of HBM’s property outlook, the residential sector is hinged upon by Bank Negara Malaysia (BNM) raising OPR four times, which will increase borrowing costs. A potential global recession predicted by international economists may impede the growth in the property market as Malaysia may face economic challenges. HBM has also stated that there is an increase in construction costs and a shortage of labour which will make property developers more cautious.
In spite of these challenges, there is still a good outlook in the property market because the formation of the new unity government may stop the political unrest thereby creating an attractive environment for potential investors. An increase of tourists from China is also set to boost the economy. HBM has also highlighted properties to focus on, which are landed residential properties, high-rise apartments under RM500,000, small-sized units and niche high-end projects in good locations.
The Office Sector
HBM has noted that the oversupply in the office sector is a concern because not many business owners are signing long-term tenancies but are opting for co-working spaces. A high demand for environmental, social governance (ESG) will result in designs which comply with ESG requirements, and the economic recovery in Malaysia may lead to business owners signing long-term contracts.
HBM stated the first nine months of 2022 have seen an increase in DDIs as well as FDIs into the country. This will spur economic growth which in turn, will lead to business expansion and benefit the office market. The growth of fintech companies will spur increased demand for office space
The Retail Sector
In addition, the retail sector will face challenges as an increase in the price of goods and services will result in customers decreasing their expenditure. An economic slowdown as a result of an increase in supply of retail floor space and shortage of staff will also lead to customers turning cautious in their spending
The lifting of travel restrictions in China will result in an increase of tourist arrivals to the country, which could increase sales recorded by malls in the main cities visited by the Chinese tourists. Furthermore, HBM predicts that if the new government sustains the political stability in the long-term, local spending may increase.
Overall, the retail sector should continue to see an improvement in 2023 but the pace of growth could be affected by the global recession depending on its severity and duration if it does happen as predicted by some economists.
Furthermore, HBM has stated that the e-commerce that sprouted as a result of customers demanding online transactions during the pandemic has been driving the industrial sector, thus creating demand for warehouse and logistic facilities. Data centres, as well as matured and established areas with good proximity to labour and accessibility will remain popular locations in 2023.
Bright spots that investors should be aware of include a return to pre-covid routines which have improved business. Economic sectors are open, international borders have opened, and Malaysia continues to record a good trade performance. The increase in inflow of FDIs, especially in the manufacturing sector is expected to translate into an increase in demand for industrial space /properties.
The Hospitality Sector
Lastly, the re-opening of the border between China and Malaysia will create an influx of tourists and The loosening of travel restrictions will allow MOTAC to draw up and implement new plans to promote the tourism industry, including reactivating the shelved Visit Malaysia Year 2020. As it is, the government has revised the tourist arrival targets to 9.2 million for 2022 and 15 million for 2023.
In spite of the positive outlook, the shortage of labour in the country will hamper growth in the hospitality industry. Malaysians have restarted their travel abroad due to decreased quarantine measures and this may decrease the local input into the hospitality sector. However, domestic tourism will still continue to play a big part in boosting hotel occupancy rates in the country.
Henry Butcher Malaysia reports a positive outlook for the property market in 2023 which has the potential to be sustained by long-term political stability, local and domestic tourism as well as customers demanding e-commerce transactions. Although a potential global recession may be around the corner, local economists do not believe that Malaysia will enter into a global recession, however, if it does occur, all these sectors may be affected and therefore, it is important to be prepared for any recession as well as focus on the bright spots within the property market in 2023.