NEW STRAITS TIMES. 14TH DECEMBER: All eyes are on the new government to maintain a stable macroeconomic climate that will foster the stability and growth of the real estate sector through the second half of 2023 and beyond.
Housing market affordability and firm financial management are anticipated to be among the property-related policies in the amended budget to support economic growth and employment, according to Muhazrol Muhamad, head of the Bumiputera segment at IQI, a division of Juwai IQI.
He said that the new government has indicated that it will revise the proposed Budget 2023 to better reflect its policy aims.
“In the area of preferences for Bumiputera, we expect continuity and stability in the new budget. Prime Minister Datuk Seri Anwar Ibrahim has stressed that his coalition government will preserve the status of the Bumiputera. We are not likely to see many changes in this area in Budget 2023,” he said.
Muhazrol believes that housing affordability and access will likely be a top policy focus for the new government.
He said these policies will be a response to the high cost of living pressures in the country and the long-standing barriers that make it difficult for young people and the Bottom 40 per cent (B40) to purchase their own homes.
“The new government has declared that protecting low and middle-income groups from rising prices is a top priority. While we face some challenges, in Malaysia, inflation is lower and economic growth is higher than in similar countries. This year’s 3.3 per cent inflation compares to a global rate of 7.4 per cent. Lucky, housing costs have not risen at the same rate as consumer goods,” he said.
Muhazrol said that potential budget measures that could help with affordability include down payment assistance, incentivising the construction of desirable affordable homes, and reducing the long-term costs of ownership through mortgage guarantees and similar policies.
“The high cost of materials is one factor affecting the housing market. Materials costs have had a serious impact on the construction of new housing in 2022. This pressure has already begun to ameliorate, with prices for steel, bricks, and so on now significantly below their peaks. The unit price index for steel in September dropped about two per cent from its August high but is still about nine per cent higher than in September of 2021. Prices for bricks and steel and metal sections have evolved similarly.
“We expect 2023 prices for major building materials to remain elevated compared to their long-term levels. This could help constrain the construction of new supply, thus indirectly assisting developers to further clear their unsold inventory.
“When building materials are so expensive, it is difficult to build affordable housing in a financially sustainable way. Margins on affordable projects are already low, so ballooning construction costs can make them entirely unbuildable,” he said.
Meanwhile, Muhazrol said that developers had shown greater confidence over the past two quarters.
Starts, completions, and planned supply of new homes have all grown at double-digit rates, he said.
“During 2020, 2021, and early 2022, developers cut back on every stage of their supply pipeline, including planned dwellings, dwellings under construction, and dwellings delivered to the marketplace. This has allowed them to clear inventory and significantly improve the supply-demand balance in many areas,” he said.
Muhazrol expects that in the first half of 2023, real estate prices will remain stable, with potential price increases to begin in the second half.
“There is a wide range of results at projects on the market today. Some projects are selling out quickly, but less well-located or designed projects are languishing. Buyers still have abundant choices, so success depends on the ability to build products buyers can get excited about. Location, size, and fixtures are all key elements of the product-fit equation,” he said.