PETALING JAYA: The Covid-19 crisis has created a new downtrend in the real estate market with prices of residential properties anticipated to remain subdued indefinitely.
Far Capital Sdn Bhd CEO Faizul Ridzuan said the depreciation in property value in recent times has relegated the function of real estate as a viable medium of investment.
He said the House Ownership Campaign mooted by the government in June has inevitably pressured further residential home prices with most developers offering a minimum discount of 10% for their property projects.
“The unprecedented loss of employment and income has shifted the attention of a vast majority of Malaysians towards the issue of daily needs.
“As it is, there are already rising concerns that the current state of economic downturn may be prolonged,” he told FMT.
In line with the looming uncertainties, Faizul said the real estate sector has been adapting to the new normal with developers exploring innovative marketing strategies to mobilise self-initiated home ownership campaigns.
“Although there is no denying that this is a challenging moment for both home seekers and the country as a whole, the fact remains that both potential tenants and buyers should take advantage of the current trend,” he said.
Faizul expects a decline in the value of residential properties over the short term before an uptrend can happen in the longer term.
“This is, in fact, an ideal scenario for property buyers to purchase value-for-money homes with developers widely expected to lower the value of properties in the aftermath of the MCO without sacrificing prospects of value appreciation in the longer term,” he said.
According to Faizul, among the reasons property value is perceived to have dropped in value is the tendency of developers to build residential properties that are smaller in size.
“As such, even as residential properties have seen their value appreciate, for example from RM600 per sq ft to RM800 per sq ft, first-time buyers can commence their home ownership spree with a studio unit of 450 sq ft instead of 800 sq ft with an initial investment of RM360,000 instead of RM640,000.
“Rolling out smaller dwellings has in a way enabled developers to maximise the construction of residential properties close to the city centre,” he said.
