According to Knight Frank Malaysia, potential buyers and investors in the residential markets have delayed making big-ticket purchases as the Covid-19 pandemic in the 1Q2020 brought upon uncertainty and derailed the recovery momentum.
In its latest research report, Real Estate Highlights 1st Half of 2020, the real estate consultant pointed out that the pandemic had taken a toll on the construction and property sectors and as of 1H2020, there was only one notable completion residence project in Kuala Lumpur, namely Sky Suites.
The report also noted that in the secondary market, the average transacted prices of high-end residential units in Kuala Lumpur were generally lower during the review period.
“As the impact of the Covid-19 continues to unfold, distressed owners may be willing to lower their prices to conclude sales,” the report highlighted.
Furthermore, the average asking rentals in places such as KL City, Ampang Hilir and Damansara Heights have also declined due to lower occupational demand among expatriates and corporate tenants.
However, the asking rentals for the localities of Mont’ Kiara and Bangsar continued to hold steady although there are enquiries from existing tenants requesting for rental relief from landlords.
The property consultant believes a rental reduction is expected within the next two to three months.
Knight Frank Malaysia has also stated that the residential market is expected to see a slow uptick post-MCO, supported by various stimulus provided by the government, especially with the reintroduction of the HOC featuring stamp duty exemptions.
“The reintroduction of the Home Ownership Campaign (HOC) featuring stamp duty exemptions and the uplifting of margin of financing limit for the third housing loan onwards for property valued at RM600,000 as well as Real Property Gains Tax (RPGT) exemption unveiled in the short-term Economic Recovery Plan (PENJANA) will help to simulate the property market,” said Sarkunan Subramaniam, managing director, Knight Frank Malaysia.
As for the office market in the Klang Valley, the cumulative supply of office space in Klang Valley as of 1H2020 stood at circa 108.8 million sq ft following the completion of Menara Hap Seng 3 in KL City and Sumurwang Tower @ i-City in Selangor with combined net lettable area (NLA) of circa 0.5 million sq ft.
The only notable office transaction in 1H2020 is of Menara Guoco. Located in Damansara Heights, the 19-storey office building with 232,133 sq ft NLA, forms part of an integrated commercial development known as Damansara City. It was sold to Tower REIT for a consideration of RM242.1 million
“The average achievable rental in KL City continued to be under pressure with growing challenges attributed to the Covid-19 outbreak, imbalance in office supply-demand and plunge in crude oil price,” the report stated.
The office markets in KL Fringe and Selangor however remained resilient with 1H2020 average achievable rental rates holding steady at RM5.80 per sq ft per month and RM4.32 per sq ft per month respectively.
As for the retail market, the Klang Valley retail landscape is expected to face hardships largely due to the fallout of the Covid-19 outbreak.
Knight Frank Malaysia also notes that the pandemic has brought upon a new norm, changing retail trends and consumer shopping behaviour.
“The pandemic has also accelerated the sales of consumer goods through online channels with many late adopters of e-commerce trying out online shopping as a means to purchase groceries or essential items during the MCO period,” Knight Frank Malaysia highlighted.
“The lower monthly loan repayments coupled with the automatic loan moratorium for six months from 1 April will provide some financial relief to households amid the current crisis. Also, with lower monthly repayment sum, borrowers who failed to obtain a loan due to the restriction of one third Debt Service Ratio (DSR) rule, may now have higher chances of securing financing,” said Sarkunan.