The Future of the Property Market

28 May 2019
Indonesia , Malaysia , Singapore , Thailand

What’s in store for 2019? 

As we head into the second half of 2019, we take this opportunity to look at the current state of the property market in key locations in the region and forecast events for the rest of the year. 

 Regional outlook 

Despite the unknowns of the presidential and legislative elections in Indonesia in early 2019, the outlook for the property market there is positive for 2019. The Property Price Index is expected to increase 4-6% year on year by the end of 2019 and the Property Supply Index by 10-15%. Thailand’s economy too is set to expand, by 4.2% in 2019, and improvements in mass transit lines, roadways and expressways as well as the new city plan will have a positive effect on both housing and condo projects in the future. However, the general election in 2019 could temporarily slow growth in the property market as consumers wait and see. By contrast in Malaysia, we will still likely see a continued price downtrend in the property market, despite improving consumer sentiment and proactive government policies announced in the 2019 Budget. This opens up possibilities of first-time home buyers being able to afford a property. The chance of a market recovery could be seen post the last two quarters of 2019. Singapore remains a tenant’s market with more than 10,000 units slated to be completed in 2019, offering more choice to renters. Properties close to public transportation, shopping centres and international schools will continue to be attractive to tenants.  

 Home affordability 

Buyers in the region are still struggling to afford homes and secure mortgages. With the Singapore Interbank Offer Rate (SIBOR) closely pegged to the US Federal Reserve, mortgage interest rates for those with floating packages are likely to climb higher, increasing the burden on Singaporean homeowners. This, coupled with the tightened Loan to Value ratio, means home buyers will need to assess if they can service a mortgage and avoid overextending themselves financially. Singaporean millennials will continue to struggle to get onto the property ladder due to lack of savings and high property prices.  

 However, in an effort to tackle rising home unaffordability, developers in Malaysia are building smaller high-rise units to cater to single adults, small families and senior citizens. SOHO units will also be in demand as technology continues to drive a work-from-home culture. Facilities and retail experiences will continue to win over homebuyers, especially Gen Y and the Millennials.  

 In Thailand, where the Overall Price Index in 2019 is expected to rise through 2019 due to project costs that are forcing especially land prices higher in locations around the mass transit network, a DDproperty Consumer Sentiment Survey revealed that 95% of consumers overall are willing to spend no more than THB 5 million on a property. Due to the tougher mortgage criteria introduced in April 2019, buyers should take steps to improve their credit rating.  

 Increased demand around transport networks 

In Malaysia, we predict a strong upsurge in demand around LRT and MRT lines, although this may be more prominently seen in the rental market as the gap between income for younger workers and property prices is still too much of a stretch. Location is also the biggest buying factor for Thai consumers, with properties preferred on Bangkok’s fringes or in the business or commercial districts. 45% of Thai millennials want to buy their own home and 65% of them have been saving to buy at around THB 1 to 4 million. Developers may want to consider addressing this market.  

 Speculative demand 

In Indonesia, the appetite for a second home will be almost as strong as for a first home, and location and access to public transport will very much be driving factors, supported by the Loan to Value relaxation and the One Million Housing programme. However, the complicated process of applying for a mortgage may still deter some buyers. The change in home loan regulations in Thailand is also driving speculative demand out of the market as those looking to buy a second home will face tighter credit controls. Most consumers in Thailand view property prices currently as too high. However, consumers with a large risk appetite should look to enter the market early and prior to the election to experience better capital appreciation in the future and should consider new locations outside the CBD.  

 A seller’s market 

In Singapore, supply of property to buy will rise in 2019 as there were $10.5 billion en bloc deals concluded in 2018 and many of these sites will launch in 2019. Prices of private condos in centrally located areas like Serangoon and Potong Pasir are expected to remain elevated due to underlying demand. Over in Indonesia, where demand is forecast to remain stable, and increase for the middle and upper segments, developers are able to supply the market with various choices. Choice is there for Malaysian buyers too. The current downtrend in the Malaysian property market is a healthy situation as there is plenty of supply to choose from and the slow market is encouraging innovation, particularly in design and build, spatial use and the use of technology 

 While the regional economy is healthy and stable, affordability and obtaining financing are major challenges for those looking to purchase a property. Property developers need to consider the demands of those planning to buy their first homes. 

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