A window of opportunity in the Residential Market
- Reset button for the property market amid rising inventory (both existing and new built) and
- Purchasers and tenants continue to be spoilt for choice as secondary pricing and rental in
selected localities remain under pressure.
- Key property-related policies and incentives to uplift the residential market.
- Homebuyers seeking ideal living space with higher emphasis on functionality and comfort
19 July 2021, Kuala Lumpur – 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.
The COVID-19 pandemic has also fuelled demand for residential properties especially new landed housing outside the city – in established and upcoming suburbs with good connectivity where prices are more affordable and competitive. With the potential shift to hybrid work arrangements post-pandemic, 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.
About Knight Frank
Knight Frank LLP is the leading independent global property consultancy, serving as our client’s partner in property for 125 years. Headquartered in London, Knight Frank has more than 20,000 people operating from 488 offices across 57 territories. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit knightfrank.com. Knight Frank has a strong presence in Malaysia with its headquarters in Kuala Lumpur as well as branches in Penang, Johor and Kota Kinabalu. The company offers high-quality professional advice and solutions across a comprehensive portfolio of property services and is registered with the Board of Valuers, Appraisers and Estate Agents. The Company is licensed to undertake property, valuations/consultancy, estate agency and property management and is also on the panel of all leading banks and financial institutions. For further information about the Company, please visit www.knightfrank.com.my. This year marks the 125th anniversary of Knight Frank LLP. Since the establishment, the brand name is backed with the strategy for growth based on the existing brand campaign of “Partners in Property. Although we’ll be looking back at our heritage and successes from the past, we’ll remain focused on our future. We’ll continue to build on our wonderful brand and most importantly engage with all of you to help us shape the next 125 years of the firm. For further information about the Company, please visit www.knightfrank.com.my