What Are The Reasons That Affect Property Prices In Malaysia?

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First of all, the location itself is the main factor that will affect the property values in Malaysia. If a property is close to school, shopping mall, bank, transportation facility, hospital, restaurant, church, temple, airport or any other places that can provide convenience to the people staying at that area, that particular property will definitely has a high property value that will attract more people than any property.

There are various reasons why property prices increase and decrease and most often it is depended on where a country is in relation to the property cycle. Most people reckon that what goes up must go down, and it is up to consumers to predict when the most suitable time is to sell or buy. Here are some reason to explain what are the other factors determines property prices.

Economic Growth and Unemployment

The recent economic downturn showed the world to what extent the economy of a country could affect its property prices. It is also a fact that high unemployment levels in a country will have a negative effect on house prices. On the other hand, when a country experiences good economic growth it is most likely that wages/salaries will increase meaning consumer have more disposable income to spend on property. This will lead to a bigger demand, which might mean higher property prices.

Interest Rates

When interest rates are low, consumers tend to lend money easier and buying property becomes an easy decision. However, when the interest rate rises, homeowners are sometimes force to sell, as they can’t afford the monthly installment on their bond. High interest rates also discourage potential buyers to purchase property because of high monthly installments. You can always use this handy loan calculator in Malaysia that will help you identify how the changes in interest rate will affect the loan.

Consumer Confidence and Market Sentiment

They way consumers feel about the property market has a big influence on how reluctant they are to buy property. Consumer confidence is the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. Market sentiment on the other hand refers to the general feeling or mood of the investment community as to the anticipated price movement of the property market. If consumer confidence is low and market sentiment appears unsettled, the demand for property will drop along with property prices.

Banks’ Lending Criteria

When a country is experiencing a property boom, it is most likely that banks will relax their lending criteria meaning more people will qualify for a bond. This will lead to high demand and property price will most probably rise. However, with the recent credit crunch, banks had extremely strict lending criteria meaning less people qualified for a bond. This lead to a drop in demand and evidently a drop in property prices. When it comes to real estate, the principle of supply and demand refers to the ability of people to pay for real estate coupled with the relative scarcity of real estate.

The property values will be driven up by the condition of high demand coupled with a certain purchasing power and a short supply due to the scarcity of land. In contrast, the property values will experience a drop when people demand less of it while more supply enters the market. Don’t fret as here’s a handy site to compare the various banks’ home loan interest rate.

Demographic Factors

Factors like divorce rate, life expectancy, increase in immigration and population growth also have an influence on a country’s property prices. These factors are sometimes influenced by economic growth, politics etc. With moving house commonly known to be one of the most expensive (and often one of the most stressful!) events in a person’s lifetime it is important to ensure that you plan your finances carefully and make sure you are aware of all the costs of moving house, which can be substantial. One important thing to consider is how much your current property is worth as this is likely have an impact on how much you will be able to purchase a new property for. There have been studies that connect the dots between demographic factors and housing affordability that is quite interesting for a read.


As expected, the location of a property has a great influence on the price. In most country’s urban properties are more expensive as the demand is high. Other location factors that influence the price of property is its proximity to schools, train station, noisy pubs and bars, industrial areas etc.

We have all heard of the phrase ‘location, location, location’ and this refers to the importance people place on the location of the property they are seeking to buy. The value of your property may be greater than that of similar properties, in just as good condition but in a less sought after location, if your property has good transport links and is well placed for commuting, is in a sought after area, and – increasingly importantly – is in a ‘good’ school catchment area. We now live in a generation of people who are prepared to – and do on a regular basis – move to a specified catchment area in order to get their children into their preferred choice of school.

The state of the economy and the housing market in general.

House prices fluctuate depending on factors such as low affordability (i.e. people earning a low salary compared to either actual or perceived (compared to salary) high property prices), the economic recession (namely the credit crunch) and rising unemployment, and the fact that people are reluctant to buy or sell a property when house prices are falling.

Condition of your property.

It is common sense that if your property is in a less desirable state than the property next door that is also for sale (which, let’s say, has a brand new fitted kitchen, a sparkling new bathroom, and new carpets throughout) then your property is likely to be placed on the market for a lower price than the house next door. Similarly, if people viewing your property are aware that if they purchased your property they would need to immediately gut the kitchen, install gas central heating and replace the avocado bathroom suite they may be willing to pay a lot less for your property than a property – even perhaps a slightly smaller property – that needs very little work doing to it.

Age of the property.

Some older properties may have historical relevance or quirky characteristics which add to the value of the property. Conversely, quite often older properties are more expensive to upkeep and may need more renovations than a newer property, which could all be reflected in the value of the property.

Extensions and improvements.

Generally speaking, extensions such as garage and loft conversions do add value to a property as long as they have been carried out to a high standard and have increased the living space in the house.

It is important, therefore, to have your property valued (by at least three different agents) before making the decision to move house. If you are still basing your budget on the value of your house when you bought it several years ago then you may be in for a surprise – one way or the other!It is important to note that all of these factors are in some or other way related and also influence each other. For example, if banks relax their lending criteria and interest rates decrease, but consumer confidence is low, property price will stay the same until demand picks up.

The government’s introduction and revision of its property related policies also played a key role in determining the value of properties.

The exemption revision of real property gains tax (RPGT) has increased the interest of a small group of people on the property market. Additionally, Malaysian government is pushing out a series of incentives to make its property market more attractive to foreign investors who will eventually bring in external cash flows. Both of these actions have enhanced the property values. In addition, the build then sell (BTS) concept has been revised. It has increased the confidence of buyers and created developers who are more conservative leading to higher value of property.

Hernee Nazir

Full-time Working Mom @ PTP | Blogger | Breastfeeding Peer Counselor | Shaklee Independent Distributor ♥ Product Review ♥ Food Review ♥ Media/ Events ♥ Advertorial ♥ Sponsorship email to: hernee.nazir@gmail.com whatsapp: 014-6106331

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