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2 Key Factors that Drive the Malaysia Property Market in 2023

Understanding the key factors that drive the real estate market is essential to performing a comprehensive evaluation of a potential investment and making you a more empowered buyer or seller.


The real estate market is a complex system that is influenced by a variety of factors. One of the most important factors that drives home prices is the state of the economy. When the economy is doing well, people have more money to spend on housing, which can drive up prices. On the other hand, when the economy is struggling, people have less money to spend on housing, which can lead to lower prices.


Another factor that affects home prices is interest rates. When interest rates are low, it can be easier for people to afford a mortgage, which can increase demand for homes and drive up prices. Conversely, when interest rates are high, it can be more difficult for people to afford a mortgage, which can decrease demand for homes and lead to lower prices.


The supply and demand of homes in a particular area is also a major factor that drives home prices. If there are more people looking to buy homes than there are homes available, prices will typically rise. Conversely, if there are more homes available than there are people looking to buy, prices may decrease.


Location is another important factor that affects home prices. Properties in desirable locations, such as near good schools or with scenic views, tend to be more expensive than properties in less desirable locations.


Finally, government policies and regulations can also have an impact on the housing market. For example, tax incentives for homebuyers can increase demand for homes and drive up prices, while zoning regulations can limit the supply of homes and also drive up prices.

1. Economic Landscape & Government Policies

In addition to the economic landscape, government policies and regulations also play a significant role in the real estate market. For instance, changes in tax policies can have a significant impact on the property market. For example, changes in tax laws that reduce the amount of mortgage interest that can be deducted can make it more difficult for people to afford a mortgage, which can decrease demand for homes and lead to lower prices.

Furthermore, zoning regulations can also have an impact on the property market. Zoning regulations dictate how land can be used, and can limit the supply of homes in certain areas. For example, if zoning regulations prohibit the construction of new homes in a particular area, this can limit the supply of homes and drive up prices.

However, government policies can also have a positive impact on the property market. For example, tax incentives for homebuyers can increase demand for homes and drive up prices. Additionally, government initiatives that promote economic growth can also have a positive impact on the property market.

It's important to keep an eye on government policies and regulations that affect the property market, as they can have a significant impact on the value of your property. Additionally, staying up-to-date on economic trends and diversifying your investment portfolio can help protect you from the negative effects of a fluctuating economy.


2. Supply & Demand

Consumer sentiments also play a significant role in the demand for property. Positive consumer sentiments, such as optimism about the economy and job security, can increase demand for property. Conversely, negative consumer sentiments, such as fear of economic uncertainty and job loss, can decrease demand for property.


In addition to demand, supply also plays a crucial role in the real estate market. Factors that can affect supply include the availability of land, construction costs, and government regulations. For example, if there is a shortage of available land for development, this can limit the supply of homes and drive up prices. Similarly, if construction costs increase, this can make it more difficult for developers to build new homes, which can also limit the supply of homes and drive up prices.


Government regulations can also affect the supply of homes. For example, zoning regulations can limit the number of homes that can be built in a particular area, which can limit the supply of homes and drive up prices. Additionally, regulations related to building codes and environmental standards can also increase construction costs and limit the supply of homes.


The Malaysia Property Market Report shows there is an increased demand for a rental property by 57.91% in 2022 from the previous year. This is compared to a supply growth of 13.78%. It does appear that the rental market will continue to expand as home ownership becomes more challenging due to inflation, rising material costs, and interest rates.


In terms of buyers, the report shows a 2.87% uptick in property prices year-on-year while supply increased by 13.21%. Demand increased as well by 7.93%, indicating growing consumer confidence. Though growing at a slower rate, consumer interest in purchasing properties shows an upward trend after the challenges of the last two years. Additionally, as the demand rate for real estate catches up to supply, prices will only shoot up more.


So as the economy begins to recover despite rising costs and inflation, it’s a smart next step for buyers and investors to look into expanding their property portfolio.



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