The new second quarter of 2024 (2Q24) IQI Malaysia Home Rental Index report showed that the average rent in Malaysia in 2Q24 was up 3.9% to RM1,995 from the previous quarter and 2.9% from a year earlier.
Juwai IQI Co-Founder and Group CEO Kashif Ansari said the index analyses over 70,000 residential rental transactions between 2018 and 2Q24, providing insights into new leases signed each quarter and offers valuable information on current rental market trends for tenants and investors.
"For the first time in a year, the annual growth rate of growth has accelerated rather than slowed. The index moves with the ebb and flow of rental property supply and demand, seasonal shifts, the influx of international students and investor activity.
"Our earlier forecast was that rental rates would climb moderately by 0% to 3%, but the index has already increased by 3.9%, more quickly than expected. We now update our forecast and project that the index to have increased at an annual rate of 5.5% by 1Q25," Kashif said.
He revealed that the average rental price in Malaysia over the past two years is RM1,895 and this is slightly lower than the 1Q average price of RM1,920.
"In Kuala Lumpur (KL), rents are 44% higher than the average nationwide. KL's premium over average rents in Selangor is 51%. Families seeking more affordable homes or to increase their disposable income can reduce their expenses by half by choosing areas with lower rents.
"In addition to having the highest average rent, KL also experienced the highest rental growth over the past quarter. The average rent in KL increased by 5% to RM2,863. In Selangor, average rents were mostly stable, climbing by 1%," Kashif said, adding that the rents in KL in 2Q24 were up 5.7% compared to one year ago.
"However, contrasting to the national trend, the rate of increase in KL's average rents has fallen for three consecutive quarters.
"Selangor is significantly more affordable than KL. Average rents in Selangor climbed to 6.2% higher than a year earlier. The RM1,899 average rent in Selangor is 5% higher than the two-year trend," he said, adding that rents in Selangor is expected to moderate from its current pace to approximately 3% growth.
Meanwhile, even though the index climbed in 2Q, many renters still enjoy what we call the "Covid Discount" in which renters continue to benefit from a situation of relative affordability, with rents well below their pre-pandemic levels.
"However, this can vary by location and property type, and this is an indicator that rents have not fully rebounded from the pandemic's effects," Kashif said.
He revealed that the average Malaysian renter now pays RM499 less in rent, which is a 20% discount from before the pandemic.
"In KL, the Covid discount is a gigantic RM1,301, or 31%. In Malaysia's most expensive state, renters enjoy a significant affordability advantage compared to before the pandemic," he noted while attributing the slower recovery to the economic challenges the country faced during the pandemic era.
However, he said now that Malaysia seems to be moving into a new growth cycle, it is expected to see a recovery in rental rates and further improvements in employment, disposable incomes and consumer spending.
"Let's look at some explanations for the regional disparity in the Covid discount. KL's persistent Covid discount may be a result of the city's higher exposure to the sectors that were most affected by the pandemic. These sectors include tourism and hospitality and international business.
"By contrast, Selangor's resilience reveals a quicker recovery and may indicate Selangor was less affected by pandemic-related economic disruptions.
"The affordability gap between KL and Selangor may have encouraged some renters to move from the capital to more affordable neighbouring areas," Kashif said, adding that the ability to work remotely has probably given further stimulus to this internal migration.
"For investors, the Covid discount may present a buying opportunity because if you are anticipating rental income to bounce higher, closer to historic levels, in the future, buying now may enable you to benefit from income growth and capital appreciation.
"The market is already showing signs of recovery and investors will focus on regions and property types that they anticipate will grow most quickly," he said.