Juwai IQI – Malaysian Rents Climbed In The Second Quarter; Economic Growth Suggests More Increases Are Ahead

Juwai IQI – Malaysian Rents Climbed In The Second Quarter; Economic Growth Suggests More Increases Are Ahead

The average rent in Malaysia in the second quarter was  RM1,995, up 3.9% from the prior quarter and 2.9% from a year earlier, according to the new Q2  2024 IQI Malaysia Home Rental Index report, which was released today by Juwai IQI Co Founder and Group CEO Kashif Ansari. 

“This Malaysia Home Rental Index by IQI analyses over 70,000 residential rental transactions  between 2018 and Q2 2024,” said Mr. Ansari. “It provides insights into new leases signed each  quarter and offers valuable information on current rental market trends for tenants and  investors. 

The IQI Malaysia Home Rental Index 

Source: IQI data on more than 70,000 residential rental transactions since 2018. 

“For the first time in a year, the annual rate of growth has accelerated rather than slowed. The  Malaysia Home Rental Index moves with the ebb and flow of rental property supply and  demand, seasonal shifts, the influx of international students, and investor activity. 

“Our earlier forecast was that rental rates would climb moderately by 0% to 3%, but the Index has already increased by 3.9%, more quickly than expected. We now update our forecast and  project that the Home Rental Index to have increased at an annual rate of 5.5% by first quarter  of 2025. 

Source: IQI 

“The average rental price in Malaysia over the past two years is RM1,895. That is slightly lower  than the first-quarter average price of RM1,920. 

“In Kuala Lumpur, rents are 44% higher than the average country-wide. Kuala Lumpur’s  premium over average rents in Selangor is 51%. Families seeking more affordable homes or to  increase their disposable income can reduce their expenses by half by choosing areas with  lower rents. 

“In addition to having the highest average rent, Kuala Lumpur also experienced the highest  rental growth over the past quarter. The average rent in Kuala Lumpur increased by 5% to  RM2,863. In Selangor, average rents were mostly stable, climbing by 1%.      

“In Kuala Lumpur, rents in the second quarter were up 5.7% compared to one year ago. In  contrast to the national trend, the rate of increase in Kuala Lumpur’s average rents has fallen  now for three consecutive quarters.  

“Selangor is significantly more affordable than Kuala Lumpur. Average rents in Selangor  climbed to 6.2% higher than a year earlier. The RM1,899 average rent in Selangor is 5% higher  than the two-year trend. Looking ahead, we expect rents in Selangor to moderate from its  current pace to approximately 3% growth. 

‘Covid Discount’ Continues to Pay Dividends 

“Even though the Rental Index climbed in the second quarter, many renters still enjoy what we  call the ‘Covid Discount.’ Renters continue to benefit from a situation of relative affordability,  with rents well below their pre-pandemic levels. This can vary by location and property type  and indicates that rents have not fully rebounded from the pandemic’s effects. 

“The average Malaysian renter now pays RM499 less in rent, which is a 20% discount from  before the pandemic. In Kuala Lumpur, the Covid discount is a gigantic RM1,301, or 31%. In  Malaysia’s most expensive state, renters enjoy a significant affordability advantage compared  to before the pandemic. 

“The slower recovery could be due to the economic challenges the country faced during the  pandemic era. Now that Malaysia seems to be moving into a new growth cycle, we may expect  to see a recovery in rental rates and further improvements in employment, disposable  incomes, and consumer spending. 

“Let’s look at some explanations for the regional disparity in the Covid discount. Kuala  Lumpur’s persistent Covid discount may be a result of the city’s higher exposure to the sectors  that were most affected by the pandemic. These sectors include tourism and hospitality and  international business. 

“By contrast, Selangor’s resilience reveals a quicker recovery and may indicate Selangor was  less affected by pandemic-related economic disruptions. 

“The affordability gap between Kuala Lumpur and Selangor may have encouraged some  renters to move from the capital to more affordable neighbouring areas. The ability to work  remotely has probably given further stimulus to this internal migration. 

“For investors, the Covid discount may present a buying opportunity. If you anticipate rental  income to bounce higher, closer to historic levels, in the future, buying now may enable you to  benefit from income growth and capital appreciation. The market is already showing signs of  recovery, and investors will focus on regions and property types that they anticipate will grow  most quickly. 

Gross Rental Yields Stable Across the Country 

“Average gross rental yields for investors are unchanged remained at 5.2% in the second  quarter, according to data from our partner, Global Property Guide. Across the region, gross  rental yields were largely stable. 

“Among the countries that looked at here, only Japan saw gross rental yields fall, and only by  one-tenth of a percentage point, to 4.3%. Yields climbed marginally in Thailand, the Philippines,  and Hong Kong.   

“Gross rental yields in Malaysia put the country in the top half of the selected Asian countries,  making residential investment property in Malaysia regionally competitive.   

“Malaysia’s 5.2% are lower than in Thailand, Indonesia, and the Philippines, but higher than  yields in four other countries, including Singapore and Vietnam. 

Source: Global Property Guide 

“Gross rental yields also remained largely stable cross Malaysia since the last quarter. We  examined yields in eight locations: Johor Bahru, Iskander Puteri, Petaling Jaya, Subang Jaya,  Shah Alam, Ipoh, Kuala Lumpur, and Georgetown.   

“Gross rental yields increased marginally in half the locations. The other half of locations are  split evenly between falling or stable yields.  

“The location with the biggest increase in yields is Subang Jaya, which saw yields jump a  surprising 0.6%, to a new high of 6%. This gave Subang Jaya the second highest gross rental  yields among all locations we examined. 

“The growth in Subang Jaya suggests a potentially favourable environment for property  investors. The overall stability in yields suggests that stability in the market. That benefits the  rental market by making outcomes more predictable for both investors and occupants. 

“Looking forward, economic growth or policy changes at home or abroad could impact yields in  Malaysia. Our forecast is for stability or a gradual increase in gross rental yields as move  towards 2025. 

“Note that yields are a calculation of gross income after expenses for property investors.

-END-

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