4 Factors Affecting Property Prices in Malaysia

4 Factors Affecting Property Prices

Property prices capture some of the main talking points among fellow Malaysians these days. After all, the sky high prices do pose a problem to those seeking to buy.

The house price index graph below indicates a fall in housing index in the second quarter of 2014 with respect to the first.

1. Leasehold vs Freehold

Homeowners generally prefer living in neighborhood with a freehold tenure rather than leasehold. Ownership in freehold property remains intact with its titleholder with no time limit unless transferred legally to other party. Leasehold is a fixed asset with maximum lease period of 99 years. Eventually, it has to be returned to the government or if the current owner needs to forego a fee to lease it further.

For those interested, the formula below highlights the premium on the land excluding the building situated on it. According to, Section 7 entitled ‘Premium’ of the Selangor Land Rules 2003,

Example: For a 4000 sqft residential property in Damansara with 20 years remaining on lease, valued at RM150 per sq ft by the Authorities, the lease renewal fee will cost

Property prices under the freehold tenure may differ from the leasehold, i.e. it could be higher or lower regardless but it is well known that freehold properties tend to perform better in terms of long-term capital appreciation due to substantial lease fee amount.

2. Location

There are multiple factors that deem a good location for some individuals. Let’s take a look at some below.

a) Distance from School, Workplace & Retailing Outlets

Generally, the closer they are to the housing areas, homeowners are expected to fork out more for the luxury. Availability of shopping centres and hypermarkets nearby definitely adds value to the premise. After all, shopping is one of the top family activities for us, Malaysians!

b) Security

With the current rising crime rates in Malaysia, any housing with added security becomes a necessity. Gate-guarded and fully landscaped neighborhood with perimeter walls, security personnel and CCTV are desirable for the safe-minded individuals. A premium can be inserted in housing price if the community is fully secured.

c) Environmental qualities

The constant urbanization creates a shortage of green space views. Most individuals prefer the era with natural landscape and views of green space. The opportunity cost of planting native tree species around the area is the amount that the developer could have received from sale of more properties instead. This cost is reflected in the higher price of properties that has an acceptable threshold environmental quality.

3. Accessibility

Getting from home to city or around the city remains an issue for most Malaysians who are unable to afford private transport. They are obliged to take public transport such as trains and buses. Having LRT and MRT within a 20 minute walk from housing areas is convenient but to a certain extent. If located too close could result in congestion, noise and petty crime. A 20-minute walk may appeal to be long for some of us; thus, it’s crucial that bus stops are close to the properties.

Highways are definitely one of the fastest ways to get to the city. Knowing that Malaysians will most likely locate the fastest route possible, housing areas with easy access to highways such as the LDP or Kesas are higher in demand, therefore higher price.

For those with cars, we all know how frustrating a task of hunting for car parks are. Countless litres of petrol are wasted through searching for them. Ample car spaces make a particular area more attractive.

Other accessibility factors such as recreational facilities could drive up the property value. After a long day of studying and working, all we want to do is sit back and relax. What a better way to do this than having a swimming pool, gym and sauna, BBQ corner nearby. Obviously, this comes with a hefty price for the housing properties.

4. Future development

High-end areas with appreciative development in the future are obviously valued more. One example includes the rezoning of land in Section 13 of Petaling Jaya from industrial use to commercial use. As a result of this shift, the value of this location spiked up.

The availability of land for expansion plays a part in property value. With vacant land in urban areas diminishing, for example in Klang Valley and general increase in population, land prices are rising.

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