Henry Butcher Malaysia: Local residential market will not be much impacted in 2023

• "Local economists believe that Malaysia will not enter a recession, although the rate of growth is expected to slow down.”

KUALA LUMPUR (Jan 10): Despite Malaysia’s residential property market being expected to face some headwinds this year, Henry Butcher Malaysia is confident that the market is not likely to reverse gears along its current recovery path.

According to the annual property market report titled “HB Perspective. Malaysia Property Outlook 2023” released by Henry Butcher Malaysia on Monday (Jan 9), the property consultant firm reckons that the residential property market is expected to face some headwinds and challenging conditions in 2023, and will probably register a slight slowdown in its pace of growth. However, it is not likely to have big impacts on its recovery path.

“Some international economists have predicted a global recession to happen in 2023 and if their predictions come true, Malaysia’s economy will be impacted and this will ultimately affect the property market negatively. However, local economists believe that Malaysia will not enter a recession, although the rate of growth is expected to slow down,” Henry Butcher Malaysia said in the report.

Meanwhile, concerns of an oversupply of office space in the Klang Valley will continue in 2023. The imminent completion of a number of mega office projects in the coming one- to two years will worsen the oversupply situation.

“The looming oversupply situation may lead to some developers rethinking about their new office projects and shelving or deferring them. [Moreover], multinational and local companies have placed increasing importance on environmental, social and governance (ESG) issues and in response, more new office buildings will adopt designs which will comply with ESG requirements in order to attract such tenants,” the property consultant firm said.

On the other hand, the retail property segment — which recorded a strong recovery in 2022, with retail sales performance registering double digit growth with the highest expansion recorded in Q3 — is expected to face more challenges in 2023, such as a substantial rise in prices of goods and services, shortage of staff, an increase in the supply of retail floor space with the completion, and the impending completion of a number of new malls.

Nonetheless, the lifting of travel restrictions after China relaxed its Zero Covid policy is good news for the retail segment, as it could result in an increase of tourist arrivals to the country, which in turn could lead to more footfalls and sales recorded by malls in the main cities visited by the Chinese tourists.

“Overall, the retail property sector should continue to see an improvement in 2023 but the pace of growth could be affected by the global recession, depending on its severity and duration, if it does happen as predicted by some economists,” the firm said in the report.

Commenting on the industrial property segment, Henry Butcher Malaysia said it was the best-performing segment in 2022 and is likely to continue its good performance in 2023, thanks to the overall improvement in economic sectors.

“All economic sectors have now been allowed to open and this will permit businesses, including manufacturers and logistics operators to resume normalised operations, while international borders have opened up and international travellers are allowed into the country without having to go for any Covid testing or quarantine. This will ease and facilitate business, as well as leisure travel.

“The increase in inflow of FDIs (foreign direct investments), especially in the manufacturing sector, is expected to translate into an increase in demand for industrial space /properties. Malaysia has continued to record a good trade performance over the past two years. This will provide a boost to demand for industrial properties. However, this may be affected by any global recession,” Henry Butcher Malaysia added.