The COVID-19 infections in Malaysia show no signs of abating despite the accelerated national roll-out of vaccines. The spike in positive coronavirus cases has led to the reimposition of MCO 2.0 in January 2021, followed by MCO 3.0 and full lockdown (FMCO) since May 2021.
The reopening of the economy is expected to be gradual as the vaccination drive continues to be ramped up under the four-phase National Recovery Plan (NRP). The country’s gross domestic product (GDP) growth for 2021, which was previously projected at between 6.0% and 7.5%, is expected to be revised lower due to the adverse impact of the prolonged pandemic on various economic sectors.
This is according to Knight Frank Malaysia’s latest publication, the Real Estate Highlights 1st half of 2021, (“REH”) which feature the findings of the property market performance across Klang Valley, Penang, Johor Bahru and Kota Kinabalu.
Sarkunan Subramaniam, Managing Director of Knight Frank Malaysia highlighted, “The residential market will continue to self-correct amid challenges brought on by the COVID-19 pandemic. There were fewer completions and launches in 1H2021 as the strict containment measures delay construction works, project delivery and completion of real estate transactions. In the secondary market, no property viewings and on-site surveys have been allowed since June. “However, there appears to be pent-up demand in the housing market evident by the short burst of recovery in market activity when movement restrictions were temporarily lifted. For the remaining part of 2021, we believe the overall interest in the residential sector is likely to remain subdued until the health crisis is brought fully under control, Keith Ooi, Deputy Managing Director of Knight Frank added.”
During the review period, the high-end condominium market in Kuala Lumpur continues to undergo price correction due to weaker demand albeit rising inventory, both existing and newly built. Similarly, in the tenant-led market, rentals remain under pressure due to weaker leasing demand.
To uplift the residential market, several key property-related policies and incentives have been announced under the various stimulus packages such as the extension of the Home Ownership Campaign (HOC) until 31 December 2021 as part of the PEMERKASA+ Package and reintroduction of the 6-month moratorium on bank loans for all individuals and SMEs under the PEMULIH Package.
Other accommodative policies include the current record low-interest-rate environment with OPR remaining at 1.75%, the exemption of Real Property Gains Tax (RPGT) for up to three residential properties for Malaysian individuals until the end of 2021 and the uplift of a 70% margin of financing limit for the third housing loan onwards during the HOC period.
“Looking ahead, there is a window of opportunity as the deployment of vaccines is accelerated to allow the gradual reopening of more economic sectors under the National Recovery Plan. The resumption and commencement of new mega-developments, supported by improved infrastructure, will boost economic activities and also aid in the recovery of the property market” said Subramaniam
On a positive note, the HOC has been successful in reducing the property overhang with an estimated 34,354 residential units worth RM25.65 billion sold from 1 June 2020 to 28 February 2021. The prolonged pandemic has also accelerated the adoption of technology in property development with more developers embracing digital marketing to clear unsold inventories and boost sales of newly unveiled products.
Subramaniam added, “the general buyer focus has now shifted from investment towards creating a haven to live, relax and work in comfort due to the ‘Stay at Home’ orders amid the various phases of MCO.”
Thus, potential buyers and investors who have the financial capability may be enticed to enter the housing market – to buy a home for their own stay, for an upgrade, for investment etc. – taking advantage of the price discount, attractive deals, stamp duty exemption as well as the current low interest-rate regime.
“With the potential shift to hybrid work arrangements postpandemic, buyers are seeking ideal living spaces with a higher emphasis on functionality and comfort. The economy is still in its recessive phase and market confidence is expected to return gradually by early 2022 as buyers and financiers are all on cautiously optimistic mode. The property market is widely expected to start recovering on the back of a more positive outlook (following recent acceleration in vaccine drive) and strong interest from domestic investors shifting from the stock market to safer and less volatile alternative investment products” Ooi concluded.