According to a wealth report for 2023 published by real estate consultancy Knight Frank recently, the demand for luxury residences that go at sky-high prices is still somewhat nascent, as evident in the fact that prices have barely moved.
For instance, the average price of a luxury residence in Kuala Lumpur rose by only 0.1% last year from 2021. For investors who put their money in luxury property, market stability is key.
This is where Singapore is ahead of its Asean neighbours. Reeve Thang, deputy managing director of Knight Frank Property Hub, said macroeconomic factors have a significant influence on the luxury property segment.
“The level of confidence of high-net-worth individuals in luxury assets tends to rise with better policies and more stable market conditions. Singapore serves as a notable example where a favourable macroeconomic environment fosters trust. This instils confidence in the resilience of the economy and, consequently, it stimulates growth in the luxury property market.”
On the other hand, the years of political upheavals in Malaysia has had investors feeling jittery. Apart from that, a lack of consistent long-term policies also diminishes the attractiveness of the local market compared to our neighbours.
Political considerations aside, the state of the economy is also a significant factor in determining the demand for property and, in the face of prevailing economic headwinds, the demand has turned sluggish.
But for those who are still prepared to invest in Malaysia, residential property is the first choice, followed by commercial property. As of the end of last year, there were more than 27,000 units of residential units worth RM18.45 billion in the country that remained unsold. Properties that are priced over RM1 million accounted for 12.6% of the residential overhang in 2021.
Data from the National Property Information Centre (Napic) shows that the overhang volume for properties worth RM1 million and above increased 19% from 3,748 in Q3 of 2021 to 4,464 units in Q3 2022.
The value of the unsold properties increased from RM7.9 billion to RM8.65 billion. During this same period, the number of new launches in the quarter increased from 44 in Q3 2021 to 184 in Q3 2022.
But not all is lost, according to Knight Frank’s Thang. “While our market may still be trailing Singapore and Thailand to some extent, we offer a diverse range of captivating luxury properties that are highly attractive to both investors and end-users,” he said. In line with that, luxury properties can still attract investors if stability returns to the economy.
