Spike in Covid-19 cases along with reimposed MCO set to affect property market recovery

According to Knight Frank Malaysia’s latest research report, Real Estate Highlights 2nd Half of 2020, the residential market has showed slight recovery post Movement Control Order (MCO) with selected developers reporting improved bookings supported by the low interest rate environment and pent-up demand.

The re-introduction of the Home Ownership Campaign (HOC) in June along with several stimulus packages as well as Budget 2021 initiatives has offered the market a ray of hope.

However, with spikes in Covid-19 cases recorded leading to reimposed MCO until Jan 26 is expected to affect market recovery in the short term.

“The anticipated commercial rollout of the Covid-19 vaccine by 1H2021 will certainly boost the hopes for the country’s economic recovery and lift overall consumer sentiment. However, the current ongoing political uncertainties amid the worsening COVID-19 crisis, has led property buyers as well as developers to rethink their future plans and strategies. The residential market is expected to remain challenging in the first half of 2021,” Sarkunan Subramaniam, Managing Director of Knight Frank Malaysia said.

As for the hospitality and retail industry continues to face challenges as well, the report show that transactional activity remains lacklustre as investor confidence and sentiment continue to be undermined by the pandemic.

“With Covid-19 remaining as a key concern heading into 2021, occupancies and rents for the retail sector are expected to decline moderately in the coming year. However, we anticipate that values of prime grade retail assets should remain relatively stable despite the rental decline, given their more resilient tenant and lease profiles, and the fact that yields will be buffered by the existing low interest rate environment,” Keith Ooi, Knight Frank Malaysia’s Deputy Managing Director said.

Commenting further on the hospitality sector,  James Buckley, Executive Director of Capital Markets, Knight Frank Malaysia expresses optimism that as the vaccine is rolled out globally and borders are reopened, international tourists will begin to return in 2H2021.

“It is likely to take some time to recover to pre-pandemic levels. Shrewd investors who are confident in their analysis and recognise the market cycle will see this period as an opportunity to acquire quality prime assets which will retain value. In 2021, we expect some good quality prime assets to trade,” he said.

“The tourism and hospitality industry has not been faring well in the face of pandemic but we expect a silver lining after the storm, a redirection of Chinese tourists will lead the way due to on-going geopolitical tensions between China and several western nations,” added Alexel Chen, Executive Director of Knight Frank Sabah, who goes on to say that full recovery of Sabah’s tourism and hospitality industry will be subjected to the reopening of international borders, amongst others.

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