Unveiling the Real Estate Landscape in 2024: Trends and projections

2023 year change to 2024 year block with dartboard icon. Goal, T

The property industry is still undergoing a paradigm shift as it shifts towards the new year

By Joseph Wong

As we embark on the journey into 2024, the Malaysian real estate sector stands at the crossroads of innovation and adaptation. The coming year promises transformative shifts influenced by a confluence of economic factors, technological advancements, new government policies and changing consumer preferences. As 2023 rolls to an end, StarProperty takes a look at the trends and projections that will shape the Malaysian real estate landscape, offering stakeholders a nuanced understanding of the challenges and opportunities that lie ahead.

Certainly, government policies wield significant influence over the real estate market. In 2024, stakeholders will closely monitor any new initiatives or regulatory changes that could impact property development, financing and home ownership. A comprehensive understanding of and adaptation to these policies will be crucial for real estate professionals and investors navigating the intricacies of the Malaysian market.

As the Ministry of Local Government Development (KPKT) is still in the process of pushing forward its Urban Renewal Act, built-then-sell initiatives, the revitalisation of abandoned and distressed properties and various other endeavours, these initiatives are poised to streamline the real estate industry and bolster its resilience.

However, along the way, humps and bumps are expected to be felt as the government grapples with the intricacies of the issues at hand. Recognising the importance of data-driven decision-making, KPKT is in the process of developing Big Data Analytics (BDA) for housing as a data centre, according to Local Government Development Minister Nga Kor Ming. “This strategic initiative aims to leverage data analytics to facilitate evidence-based policy formulation and enhance institutional capabilities in planning and monitoring the housing industry. As the population of Malaysia continues to grow, the BDA for housing will play a pivotal role in addressing the evolving demands and ensuring that housing initiatives align with the unique needs of different localities,” he said in his commentary for StarProperty on page 2.

Technology reshaping property transactions

The integration of technology into property transactions is set to redefine the way Malaysians buy and sell real estate. In 2024, digital platforms, blockchain solutions and virtual property tours will become more pervasive, ushering in an era of increased transparency, efficiency and enhanced customer experiences. This tech-driven evolution seeks to streamline processes and bring the industry closer to the digital-savvy expectations of modern homebuyers.

One of the most significant technological shifts is the advent of data centres. These centres currently dominate the industrial landscape and have been at the forefront of technological innovation, serving not only as data repositories but also as providers of backup, disaster recovery, data management and networking solutions. The demand for data centre services has experienced significant growth in recent years, propelled by factors such as cloud-based services, IoT, big data analytics and the swift pace of digitalisation.

The rise of Artificial Intelligence (AI) has emerged as a game-changer in the Southeast Asian region, especially in Malaysia. Data centres are poised to play a pivotal role in the country’s journey towards becoming a dominant player in the industrial sector and the renewable energy market, as highlighted by AREA Group of Companies Executive Chairman Datuk Stewart LaBrooy.

If Malaysia is to become a key player in Asean, the nation has to pursue a sustainable energy transition, addressing the energy needs of data centres

If Malaysia is to become a key player in Asean, the nation has to pursue a sustainable energy transition, addressing the energy needs of data centres

According to a report by TechNavio, the data centre construction market in Southeast Asia is anticipated to grow by USD 3.61bil (RM16.83bil) between 2021 and 2025, with a compound annual growth rate (CAGR) of nearly 12%. While increased usage of cloud-based services and the adoption of digital technologies traditionally fueled this demand, the distinctive feature of the current trend is the rapid advancement of AI.

Data centres are on the verge of reshaping Malaysia’s technological landscape and could become key players in the Asean renewable energy market. However, the rapid growth of data centres, driven by the surge in AI, poses a significant challenge to Malaysia’s energy infrastructure. As the nation pursues a sustainable energy transition, addressing the energy needs of data centres while adhering to renewable energy sources becomes a complex task.

Malaysia must invest in the necessary infrastructure to position itself as a leader in the global data centre industry, simultaneously finding innovative solutions to ensure a sustainable energy future. 

Striking the right balance between becoming a data centre hub and achieving renewable energy targets will be crucial in shaping Malaysia’s role in the Asean market and its contribution to the global tech ecosystem. At the same time, the real estate industry also needs to quickly adapt to the environmental, social and governance (ESG) issues as the entire world has shifted its focus towards sustainable practices and when it comes to wooing foreign investors and buyers, ESG must be at the forefront.

Sustainable development initiatives

To say that sustainability takes centre stage in real estate development is somewhat of an understatement. With an increasing awareness of environmental concerns, 2024 will witness a continued emphasis on eco-friendly and energy-efficient buildings. 

Real estate developers are no longer merely responding to regulatory requirements. Instead, they are proactively integrating green practices into their projects. This shift is not only a reflection of changing industry norms but also a response to the escalating demand for sustainable living spaces from environmentally-conscious Malaysian homebuyers.

Sustainable development initiatives encompass a spectrum of practices aimed at reducing the environmental impact of real estate projects. These include energy-efficient designs, renewable energy integration, green building certifications, waste reduction and recycling, community engagement, nature preservation and water conservation, among others.

Notably, property developers are beginning to incorporate innovative architectural designs that optimise energy usage. This involves leveraging natural light, installing energy-efficient appliances and implementing smart building technologies to minimise energy consumption. The integration of renewable energy sources, such as solar panels, is also becoming more prevalent. Developers are exploring ways to harness clean and sustainable energy to power residential and commercial spaces, reducing dependence on conventional energy grids.

While there is an increased focus on obtaining green building certifications, such as the Green Building Index (GBI) in Malaysia, the market is not quite ready to absorb the cost. To the general public, these certifications only serve as benchmarks for environmentally sustainable construction and operation, ensuring that projects adhere to specific eco-friendly criteria but they are not necessarily required as development can still be environmentally friendly without the certifications.

In matters of waste reduction and recycling, sustainable development must go beyond energy considerations to include waste reduction and recycling strategies. While developers are implementing waste management systems to minimise the environmental impact of construction and promote responsible disposal practices, the collective argument is that these practices must be inclusive of everyone. There is no point in recycling if everything eventually ends up in the same rubbish dump.

The shift towards sustainable real estate development in Malaysia reflects a collective commitment to environmental stewardship. It not only aligns with global sustainability goals but also caters to the preferences of an increasingly environmentally-conscious consumer base. As the real estate landscape evolves, sustainable development will likely remain a driving force in shaping the future of Malaysian communities.

Evolution of urban living

The dynamics of urban living are undergoing a paradigm shift, shaped by remote work trends and evolving lifestyle preferences. As Malaysians increasingly seek spacious living and a respite from crowded city centres, suburban and rural properties may witness a surge in demand. This shift in housing preferences could have a ripple effect on property values, prompting developers to recalibrate their strategies to align with changing residential priorities.

Moreover, the commercial real estate sector is poised for adaptations in response to changing work patterns. In anticipation of the continued rise of remote work and hybrid office models, commercial properties are likely to focus on flexible workspaces and advanced technological infrastructure. Retail spaces may undergo further evolution to meet the demands of the ever-growing e-commerce trends. These factors. Among others, will shift the demand for future home designs.

Economic factors and interest rates

And finally, economic conditions, including fluctuations in interest rates, remain key determinants of the real estate market’s health. As Malaysia responds to global economic shifts, stakeholders must be prepared for potential changes in interest rates that could impact mortgage affordability and influence property investment decisions.

One of the most critical economic factors affecting the real estate market is the fluctuation in interest rates. Changes in the central bank’s monetary policy, including adjustments to the Overnight Policy Rate (OPR), can have a direct impact on mortgage rates. Higher interest rates can potentially reduce housing affordability, affecting both property demand and investment decisions.

Affordability is still a key consideration for many homebuyers. If interest rates rise, the cost of borrowing increases, impacting the affordability of mortgages. Developers and real estate stakeholders need to closely monitor interest rate movements to anticipate shifts in housing demand and adjust their strategies accordingly.

The Malaysian real estate outlook for 2024 paints a portrait of a dynamic and adaptive market, responding to the convergence of technological advancements, sustainability imperatives, evolving urban dynamics, government policies and economic factors. 

As industry professionals, investors and property buyers navigate this intricate landscape, staying well-informed about local nuances and embracing innovation will be paramount to unlocking opportunities and achieving sustained success in Malaysia’s ever-evolving real estate sector.