Mobility, stability & affordability

Experts and leaders in the property segment share their thoughts and directions for the market as 2021 sets in with a raging virus

The Coronavirus triggered major shifts in almost every sector in the country and the property segment was no exception to the changes that took place.

Development and construction saw a brief pause due to the lockdown regulations that was imposed to curb the space and the domestic and international border closures impacted property buying and rental. And after a year filled with challenges and turbulence, the market started observing recovery only to once again face a reimposed Movement Control Order in early January this year.

BusinessToday speaks to experts and leaders in the property market on what is in store for the property market in 2021 as the virus rages on and players in the market continue to innovate to stay ahead.  

“Following the stamp duty exemptions announced by Putrajaya during Budget 2021, we anticipate more consumers will be searching for homes in the subsale market. The generous discount offered will prompt many to continue their search for the perfect home this year,” Shylendra Nathan, General Manager of iProperty.com Malaysia Sdn Bhd says.

The stamp duty exemptions announced during the Budget 2021 tabling for first time homebuyers is valid until 2025. A home buyer who purchases a home priced up to RM500,000 will get to enjoy cash savings amounting to RM12,500.

Another factor he says that this has sparked interest in property purchases, especially among middle and upper class households is the support provided by the government in the form of easy financing through the progressive reduction of Overnight Policy Rate (OPR) rate to its current 1.75 percent, which is the lowest value in over 15 years.

Nathan is also predicting for further reduction in the OPR in Q1 this year.

The property site has also seen organic searches for subsale property listings on an upward recovery of +41 percent  by the end of the first week ofJune 2020 following the implementation of the CMCO. “Unique visits for subsale property listings on iProperty.com.my experienced an upward recovery of 85% by Dec last year,” Nathan says.

Commenting on the trend for the year, Vincent Lim, Managing Partner of The Property Guys foresees that purchasing homes would do better as opposed to rentals due primarily to the Home Ownership Campaign (HOC), resulting in full stamp duty exemptions for first time home buyers from now until 2025.

Vincent Lim, Managing Partner of The Property Guys

“Developers will continue to churn out all sorts of schemes to encourage renting and purchasing of any sort such as rent-to-own, zero down payment and high discount rebates for instance. Office spaces will also continue to see a decline as corporate tenants will start to realise the plethora of cheaper options out there.

However, I’m rather uncertain about shopping malls as it highly depends on restrictions posed by the government as a result of the pandemic,” Lim tells BusinessToday.

The Managing Partner also foresee that auction properties and firesales will end up saving businesses while developers will be adding more value to their offerings. He also highlights that fully furnished designer homes will become increasingly popular to help buyers complete their home ownership journey to ease their burdens further.

Property developer, Mah Sing Group is cautiously optimistic that demand for their property projects will be able to continue to attract the home buyers’ interest driven by their strategic location, attractive price points and packages, as well as innovative design and layout.

“In line with better economic outlook in 2021, demand under the property market is recovering as purchasing power from households improves gradually and we believe affordably priced properties at strategic locations will still be well sought after,” Mah Sing Founder and Group Managing Director, Leong Hoy Kum says.

Mah Sing Founder and Group Managing Director, Leong Hoy Kum

Mah Sing’s internal findings reveal that many have come to realise the importance of owning a property, especially properties with strategic locations with ready amenities.

To this end, the Group recently introduced their HOME with Mah Sing Campaign where it is premised on the concept of everything ‘originates’ from home. The campaign allows anyone to own a home – with payment-free for up to four years and will run until March 31, with Mah Sing also throwing in various incentives and savings aimed at easing the path towards home ownership, such as low booking fees starting from RM500, free stamp duty and legal fees.

Commenting on the HOC and the full stamp duty exemptions, IDEAS senior fellow, Carmelo Ferlito says while the initiatives can support the market, he however do not see the measures to radically change the trends that are in place.

“We do have to distinguish between long-term trends and short-term effects. The Malaysian property market is experiencing a decade long cycle and now this cycle is in its downtrend, as witnessed by the constant cooling down of prices,” he tells BusinessToday.

As for this year, Ferlito sees the continuing of the stabilisation process which is typical of the last stage of a business cycle. Therefore, prices will keep cooling down and transactions will remain more or less stable, after the post-lockdown physiological rebound.

“Consider that in Q3-2020, we recorded +7.4% in transaction volume (q-o-q) but -2.4% in transaction volume (q-o-q). This means that we had more transactions but of lower average price. The average value of transaction in Q3-2020 was around RM 380,000, while it was almost RM 420,000 in Q3-2019,” he added.

This anyhow is an improvement from the dramatic figures of H12020 which was -27 percent in volume and -31 percent in value. He believes focus should be placed on the cyclical trends rather than on the short-term signals.

A virtual norm ahead

“The new norm that took place in 2020 will become an existing norm that everyone is already used to, virtual tours, online meetings, e-commerce and deliveries. Hence everyone will be expecting better and more convenient products and services this year,” Lim points out.

He is also optimistic that virtual tours for rental properties will likely be increasingly more popular as people become more comfortable with a digital lifestyle.

Joining in, Nathan says as most consumers have gotten used to the new norm and should still be able to scout online for properties they are interested to purchase or rent in 2021. However an ongoing challenge, he highlights, is the approval of home loans. Although the interest rate is at an all-time low, many aspiring home buyers still find it tough to secure a loan.

Shylendra Nathan, General Manager of iProperty.com Malaysia

According to the latest Bank Negara figures in Dec 2020, the home loan approval rate is at only 35.2 percent. Consumers are encourage to evaluate their financial capability and ensure their target property is within their income bracket and debt profile.

However, with recent news of vaccinations set to take place in March, Nathan says the news will boost confidence among homebuyers.

“The positive update will provide most with a sense of relief and safety, thus encouraging them to process with their day-to-day activities. Consumer confidence will definitely contribute towards higher housing demand. Investor too will be more optimistic about the future, which will encourage further movement in the local property market,”  he says.

Ferlito on the other hand is remaining prudent on the vaccine. “It was just announced and a  new virus mutation has appeared. Side effects are yet to be fully understood.

So, while I preached to avoid panic amid the Covid-19/MCO crisis, at the same time I preach to avoid euphoria for the vaccine. Let’s analyse all the trade-offs in place and take sound decisions based on sound analyses,” he urges.

Mobility over stability

Even with the reintroduction of the Home Ownership Campaign, Lim says the rental market below RM2,000 will remain the same regardless as there will be a constant supply of young adults and students who are not ready to buy a house.

“The same goes to anything above RM4,000, because this price range is mostly to suit the expats and foreign tenants. The rental market between RM2,000 to RM4,000 will be affected because this batch of income earners will be tempted to buy their first home to take full advantage of the benefits, together will the current record low interest rate. Hence, we have to give more values to our tenants in order to maintain our business,” Lim stresses.

Ferlito agrees with Lim, highlighting that rental will probably become the preferred choice for younger generations which, despite the outbreak, will promptly restore their preference for internal and international mobility.

“With a growing number of people preferring mobility over stability, the rental market will play a growing role in Malaysia in the near future.”

Still room for affordable products?

“I believe that, for political reasons, in the past years, the debate on the affordable segment has overemphasised the need for affordable homes. Despite the past political debate, home-ownership is pretty high in Malaysia, around 77% and it is normal that there is less demand for middle and lower income homes, while high-end units remain attractive for investment purpose,” Ferlito tells BusinessToday.

He also shares that with over 16,000 high-rise overhang units, 57 percent of the units are priced below RM500,000 and with 8,607 terraced houses unit overhang, 61 percent of the units are priced below RM500,000.

Similarly, the IDEAS Senior Fellow also says that the economic crisis does not play in favour of investment from middle and lower income groups, which are more financially at risk and at the same time may want to recur to the secondary market. He foresees these trend to stay in 2021.

Additionally, property developer, Mah Sing Group says they are well aware that the financial difficulties and constraints in getting the appropriate financings have been major hurdles and these have heightened particularly during the outbreak period.

As such, the Group is planning to continue their focus on offering affordable range of products near city centres with good accessibility and ready amenities such as M Luna and M Adora that have seen encouraging demand, as affordability remains as one of the key concerns for the industry.

“Our wide product mix with successful project launches within the affordable segment and right location focus where demand remains resilient, has laid down a strong foundation for Mah Sing to reach greater heights,” Leong says.

This can be related where for example, under the HOME With Mah Sing Campaign, buyers have the option of choosing a sales package which offers a payment-free period of up to 4 years (the exact payment-free tenure differs for each participating project). Depending on the project, this payment-free period comes into play during construction, or upon VP.

The Group says their latest campaign is designed to look into specific pain points in customers’ home ownership journey. “This as the campaign is rested on three pillars or key concerns namely financial (financing issues, cash-flow, return on investment), uncertainty (job & pay security, economic recession, property market price & supply), and product (quality & features, pricing & affordability package, reputation & track record),” Leong tells BusinessToday.

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