Booming rental demand presents opportunity for investment properties
The second quarter of 2022 recorded a 96.83% YoY and a 12.89 QoQ risein the Rental Demand Index, according to the Malaysia PropertyMarket Report Q3.
The Rental Demand Index is based on the volume of inquiries forlistings on PropertyGuru.com.my and numbers for Q2 outperformed alreadysignificant gains captured in the first quarter of the year.
The rental market is expected to expand further in the coming quarteras rising inflation, interest rates and material costs make home ownership moreexpensive.
As housing is a basic human need, thoseunable to make the leap to home ownership in the year ahead will be forced tocontinue renting.
The Rental Price Index, which tracks the median asking rent prices ofall rental property listings on the website also saw an increase of 2.82% QoQand 4.46% YoY in Q2 2022. This was a jump from 1.22% QoQ and 1.96% YoY growthcaptured in the previous quarter.
The experience of property agents on the ground correlates with thefindings.
“Many landlords willingly lowered rental rates during the pandemic toattract tenants as they were aware market demand was severely disrupted withthe movement control orders (MCO),” said Serene Chong, a real estate negotiatorfrom Kith and Kin Realty.
“But now with inflation and economic activities in full swing, some ofthe owners are naturally demanding for higher rental – some ask for 20 – 30 %higher rates,” added Chong who covers Shah Alam.
Chong notes most of her recent rental transactions were 15% higher inprice than the rate it was previously rented out at and it’s just a matter oftime before available units are be taken.
She believes the aggressive rental demand in the area is furtheramplified by return of physical classes in colleges and universities as well asphysical attendance in offices.
From a supply standpoint, the Supply Index which tracks the volume ofrental listings on the website showed increases of 6.18% and 10.42% QoQ. Thiswas a minor jump from the 1.68% QoQ and 1.15% YoY gain captured in Q1 2022.
The gap between supply and demand for rental units presents anopportunity for property developers to reduce the void with investment-orientedproducts.
As inflationary pressures could likely reduce the number of firsthomebuyers, a market for investors in pursuit of investment properties withdecent rental yields could open up.
In 2021, 36.6% of residential propertytransactions were by investors (categorised as those who own more than oneproperty) and investors also made up 34.8% of buyers in the previous year.
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