Property Investment 101: Rental is rising, is this surprising?

Property Investment 101: Rental is rising, is this surprising?

So many new properties, how can rental be increasing?

Great question and I do not have a great answer for you. However, I have a question. Given a choice, as a landlord, would you reduce the rental when there are many new properties in the market? Short answer is No. Long answer is No… unless of course all these new properties are on my left, right, front and back. Then, I may have to reduce rental if they are all being rented out cheaper than me.

If these new properties are smaller in size, further away from the city centre than mine or even in less mature neighourhoods, then I would tell the tenants who wants lower rentals to go and find these new properties instead lah. I will still do the best to maintain or increase my rental too. Surely not going to be reducing my rental unless I have no choice yeah.

Here are the latest rental numbers from Juwai-IQI. If you need to refer this is their full report. Selected charts as below showing the rental market of Malaysia.

Key Highlights from the Report:

– Nationwide Trends: The average rent across Malaysia has increased by 1.8% from Q1 2023 to RM1,920, with a trend towards increased affordability as the rate of increase declines.

– Kuala Lumpur: Rents have risen by 7.6% annually to RM2,735, yet remain 27% lower than pre-pandemic levels in Q1 2020, indicating a gradual recovery.

– Selangor: Average rents have surged by 10% annually to RM1,879, fully recovering to pre-pandemic levels.

– Gross Rental Yields: Nationwide yields are stable at 5.16%, with Johor Bahru offering the highest yield at 6.25%.

– Vacation Rentals: The market is booming, with projected revenues of RM5.3 billion in 2024, expected to reach RM6.9 billion by 2028.

– Tourism Rebound: Tourist arrivals are nearing pre-pandemic levels, with 20 million arrivals in 2023 compared to 26 million in 2019.

IQI Co-Founder and Group CEO Kashif Ansari said: “This is the second quarterly edition of the Malaysia Home Rental Index by IQI, complementing NAPIC’s Malaysia House Price Index. This report is based on over 67,000 residential rental transactions since 2018. That makes it the most comprehensive measure of rental trends in Malaysia. Nationwide, the average rent is RM1,920, up 1.8% from Q1 2023. While the average rent did increase, the rate of increase has slowed, which indicates a trend towards increased affordability.”

This report provides an in-depth analysis of the factors influencing rental prices, including supply-demand dynamics, international student presence, and investor activity. It also offers a forecast for the next 12 months, predicting a moderate rental rate increase of up to 3%.

Average gives some idea on trend but for specifics, go deeper

All these are average number and it gives us some idea on how things are trending. It doe snot mean every condo has an increase in rental by the same percentage yeah. Immediately people will ask, are you sure this is the rental number? How come my rental is lower than a year before? How could I could not rent out my place until today? How come the rise is so little? Last year I increased my rental over 10%! There could be more views but let’s take all these numbers with a pinch of salt.

What is true however is that if the number of visitors continue to grow, the demand for properties will also rise too. Here’s that earlier article: Malaysia is top destination for tourists

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