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Remote Work Influence on Property Demand: A Nilai Case Study

June 12, 2024

When companies embrace flexible work arrangements, employees benefit from reduced transportation costs due to decreased commuting. This shift could also alleviate congestion, especially if many workers adopt remote work schedules permanently. With lower commuting expenses, employees might consider relocating to areas where rents are more affordable and amenities more plentiful.

Furthermore, the transition to remote work results in more employees working from home, effectively shifting the demand from commercial to residential spaces. This change necessitates larger living areas to accommodate work spaces.

A 2023 study by Ferdinando Monte, Charly Porcher, and Esteban Rossi-Hansberg1 explores the varied impacts of remote work on urban areas. Utilising cell phone data to track worker mobility, the researchers observed that the reduction in commuting differed significantly among cities. 

For example, New York saw a more than 80% decline in trips to its Central Business District (CBD) during the pandemic, a figure that has since stabilised to 40% after the pandemic. In contrast, Madison, WI, experienced a similar initial drop in traffic but has returned to pre-pandemic levels. The study also found that while the rent gradient in major cities has flattened somewhat, it has started to revert or even disappear in smaller cities.

Property Demand in Nilai, Negeri Sembilan

Nilai is a vibrant city situated in the Seremban District of Negeri Sembilan, Malaysia. It is recognised for its educational institutions, including Nilai University and INTI International University, which attract students from around the globe. The city's strategic location near the border with Selangor places it within the Seremban metropolitan area and part of the Greater Kuala Lumpur metropolitan area, making it a hub for development and growth.

Established in 1959 and gaining municipal status in 2002, Nilai has seen rapid expansion, particularly due to its proximity to the Kuala Lumpur International Airport. This growth is evident in the numerous development projects and the establishment of major shopping centers like the Nilai 3 Wholesale Centre and MesaMall. The city's name, which means 'valuable' in Malay, reflects its historical significance and the value it offers as a commercial and educational center.

As inflation persists and prices in Kuala Lumpur remain high, potential homebuyers are increasingly considering properties in outlying areas such as Nilai. The PropertyGuru Market Index for Nilai, which reflects the Demand-to-Supply Ratio calculated from the number of weighted visitors against unique listings, has shown a steady upward trend since October 2023. (See Figure 1).

Figure 1: PropertyGuru Market Index for Nilai

Source: DataSense by PropertyGuru For Business

The Demand Index for Residential Properties for Sale has been trending up steadily since October 2023, and the Supply Index has been declining over the same period (See Figure 2).  

Figure 2: Demand and Supply Index for Nilai 

Source: DataSense by PropertyGuru For Business

Where are the buyers coming from?

Our hypothesis that property seekers are looking to move further out from Kuala Lumpur is further validated when we examined the origins of the property seekers’ IP addresses. Close to 50.1% of the property seekers looking in Nilai in April 2024 originated from Kuala Lumpur, and about 21.1% of the property seekers came from Selangor (See Figure 3). 

Figure 3: Domestic Demand Breakdown from Nilai

Source: DataSense by PropertyGuru For Business

Transacted prices rose from Feb 2023 to Feb 2024

Using the unit prices of transacted Service Residences, Apartments, and Condominiums as a proxy, the median unit price in Nilai was RM206 per square foot in February 2024, slightly higher than the RM195 per square foot recorded in February 2023.

Figure 4: Median unit price of serviced residences, apartments and condominiums in Nilai

Source: DataSense by PropertyGuru For Business

Will prices go higher in the future?

Several factors will influence future real estate trends, including the potential for further price increases. Firstly, it is uncertain whether the shift towards remote working will persist. The intangible costs of remote work, such as information loss and diminished synergies, could prompt a return to traditional office environments. If a significant number of workers revert to commuting, the increased travel costs might outweigh the benefits of living farther from employment hubs like Kuala Lumpur, leading potential property buyers to move closer to these centres.

Secondly, the emergence of other desirable locations, particularly those offering superior amenities, could compete with current hotspots. This competition could dilute demand in areas like Nilai, preventing sustained upward pressure on prices.

Footnote:

1Monte, Ferdinando, Charly Porcher, and Esteban Rossi-Hansberg. Remote work and city structure. No. w31494. National Bureau of Economic Research, 2023.

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