After a decade-long housing boom, the Malaysian real estate market has been cooling down over the past two years due to a massive oversupply. The total value of unsold apartments amounted to $4.41 billion last year in large cities. This is the result of the rapid construction of luxury real estate during the recent boom. But the measures taken by the government to maintain the market are partially working.
The government has introduced many measures to control speculation and dissuade developers from increased activity. The stamp duty on real estate worth more than $238,578 was increased from 3% to 4%. The authorities also introduced an additional 5% tax on the increase in the value of real estate (COUPE) when selling properties that have been owned for more than six years. However, these measures were temporarily relaxed to cope with the impact of the pandemic.
The COVID-19 pandemic has undermined demand, increasing downward pressure on prices. As a result, real estate prices rose by a slight 0.3% during the year to the first quarter of 2021, compared with an increase of 1.9% in the same period last year, according to the Department of Valuation and Property Services (JPPH). This is also a sharp slowdown compared to the 7.5% annual price growth from 2010 to 2019. Adjusted for inflation, housing actually fell in price by 1.3%.
On a quarterly basis, house prices increased by 1.7% in the first quarter of 2021, but decreased by 0.2% in real terms. The average cost of residential real estate in Malaysia was $103,106.
During 2020, houses with terraces rose in price by 2%, individual houses - by 1.1%, semi-detached houses - by 0.6%, apartments in residential complexes - by 0.8%. The corresponding average prices were $95,491, $157,849, $157,743 and $80,789.
The most expensive real estate is in Kuala Lumpur, the average price in 2020 was $185,648. Next are Selangor ($116,106), Sarawak ($113,539), Sabah ($108,854). The cheapest accommodation is in Malaka ($47,716).
The Malaysian economy shrank by 5.6% in 2020, which is in sharp contrast to the annual increase of 4.3% in 2019. This is the biggest decline since the Asian financial crisis in 1998. From 2010 to 2019, the economy grew at an average annual rate of 5.3%. It is expected that the situation will normalize this year, experts of the International Monetary Fund (IMF) predict real GDP growth of 6.5%.