Good news for Malaysian renters, not so much for buyers

Are you currently renting or looking to rent? If you are, there might be some good news for you on the horizon.

Rental charged for condominium units in Malaysia is expected to drop by 20 per cent to 40 per cent due to an oversupply: As more and more of them become ready for occupancy and come onto the market, buyers are finding it difficult to sell their units for a good price and are being forced to rent them out for much cheaper than usual.

Siva Shanker, the immediate past president of the Malaysian Institute of Estate Agents (MIEA), says he is absolutely certain that for the next one to three years, the biggest winner will be the rental market.

"The guy who wants to rent will suddenly be able to find a nice, brand new condo with facilities for half the price it should actually go for," says Siva, who is also the chief executive officer of PPC International Sdn Bhd, a property consultancy and real estate group.

This, he says, is because in 2012, 2013 and 2014, many properties were bought on speculation by those wanting to flip them – sell them – as soon as they were ready to be occupied.

And a lot of these condos will be ready at the end of this year and in 2016 and 2017.

These flippers, he says, did not put any of their money down because they took out a 100 per cent housing loan (lending regulations were less stringent then) and also took advantage of DIBS, the developers’ interest-bearing scheme, in which the developer absorbs the interest of the housing loan during the construction period.

Siva says some buyers might end up losing their properties because they can’t pay their loan instalments and it becomes a non-performing loan (NPL); some would struggle but somehow manage to service their loan; and then there are those who might choose to rent out their |unit rather than sell it at such a low price.

"The buyer [flipper] might ask for 3,500 ringgit (Bt29,000) rental but not get it, then he’ll drop the rental, then drop it and drop it again to RM2,000 or RM1,500 ... so it will be a renters’ market," he says.

However, Siva stresses that it is not the entire housing sector that will be affected by lower rents; this would apply only to select speculative sectors.

Even during the current economic slowdown, prices of property in the KlangValley have not come down, he says. Nevertheless, Siva claims, even though all the data is not in yet, he can tell that 2015 will end up looking like a bad year for the property sector.

This is the case, he maintains, even though there was actually a slight improvement in the volume of transactions in 2014 compared with 2013.

"It was very small but an improvement, nevertheless. All of us thought ‘great, the downside is over’. "

He predicts there will be a bit of interest coming back in the first quarter of 2016 and that in the second quarter, the market will be just about ready to recover.