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Rental units up, Rental rates down. Double whammy, really.

This was the title of the iProperty.com’s latest report about the rental market of Malaysia. “Double whammy of rental units piling up & rental rates declining” Yes, this is like a bolt of pessimism into the property market and many property owners who are still trying to rent out their units would now be feeling even more stressed. This is the report in full (click to download).

Demand is not spread out across all areas whether up or down

Please do read carefully and we need to now realise that the demand remain strong for some areas and weak for some areas and if we look at the current situation, then we need to realise that the current weak demand is also caused by the circumstances too. Students unable to go back to their universities meant that the demand for rental units will not happen. With the many restrictions, many potential movements such as moving out, moving up, moving away could not happen and thus demand stays stagnant too. Image below from iProperty.com explains it clearly. Demand is still up for some and down for the rest.

Below image is for Selangor.

Job market growth is vital. How’s it doing now?

With the job market still on a low mode, the hiring of new people have also slowed down and this meant that the migration of many of these graduates from smaller towns and cities have also slowed down too. The current employment rate? Higher than the many years before the arrival of COVID-19. Image shows the number.

unemployment

Tourists’ demand for accommodation is vital

This is not all, remember Malaysia used to attract over 26 million international tourists per year? That’s over 2 million every month! Imagine how much rooms / homes these tourists would need to rent. (They cannot be sleeping on the streets yeah) With international travel now closed, this piece of huge demand has dropped tremendously too. In fact, even local travels do not happen because travelling between states remain BANNED under the CMCO 2.0. This has been extended to mid April 2021 too.

Okay, enough of bad news. Unfortunately for home owners who has yet to rent out their units, this will be a testing time. Renting out the home with a lower rental rate may be a survival mode. With this survival mode, it is highly likely that the rental rates will go lower. Cutting the losses is more important than having full losses.

What’s next?

It will get a little better when travelling between states are allowed, institutions are back to physical classes and with more vaccinations, perhaps some travel bubble could be established and this will be where demand really bounces back. That is unfortunately some months away, conservatively. In the mean time, please tell everyone around us to sign up for the vaccinations. The earlier the country is vaccinated, the earlier that everything could have a chance to go back to normal. Happy doing our best.

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Next suggested article: Top 10 most searched areas for rental in Malaysia

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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