May 2018 was a watershed in many ways.
There were high hopes for the property sector which started at a low base in 2009 which became highly-unaffordable today. Hope ran high among those in the sector that the new government would help resolve some old issues including the lack of affordable housing and high prices.
The last 22 months showed otherwise although to be fair, there were attempts to get the sector on a more even keel.
There was a lot of hype about things to be done. The consolidating of the various housing agencies under one roof was one of them. Speedier supply of affordable housing was another.
“The latest hype was that foreign buyers from Hong Kong and other countries would come ‘to rescue’ us from our residential overhang including serviced apartments and small offices home offices valued at RM34bil, ” says a source.
But that seems like wishful thinking, notwithstanding the fact that some developers did enjoy good sales from Hong Kong buyers.
Property tycoon Tan Sri Desmond Lim Siew Choon, who is building the 15.89-acre Pavilion Damansara Heights is one of the beneficiaries. It is uncertain how others perform with respect to their Hong Kong outing.But one swallow does not a summer make. The success of one developer does not mean others share similar success.
“One has to consider the size, both in ringgit value and the volume of unsold stock – the overhang – in the country and how much foreigners are buying. Malaysia has never had a high percentage of foreign buyers, ” says the source.
“We cannot depend on foreigners to rescue us from our overhang stock. Neither can we expect multinational companies to fill up our office space just because our office rent is the lowest in the region.“Other holistic measures are needed. Like the planning and controlling new supply of the different segments and the provision of incentives to make property construction more progressive, among others, ” he says.
Property consultancy VPC Alliance Sdn Bhd managing director James Wong says although housing developers have already dropped prices, they remain unaffordable to many.
“Many developers are selling 20% to 25% below launching prices by giving a lot of freebies. So prices have dropped, although indirectly, ” says Wong.
On the political turmoil of the past one week, Wong likens it to the birth of a child. When the child emerges, people are happy but there has to be a readjustment for the household.
“We are adjusting to a political transition and the events of the past one week are the normal birth pangs of a new government, ” he says.Hopefully, ministers who are able to perform will take over and the government will be put on a better footing, Wong says.
Another property consultancy PPC International Sdn Bhd managing director Datuk Siders Sittampalam expects confidence among investors and consumers to drop in the short-term.
“A weak government does not give confidence. Decisions will be deferred, ” he says.
Having said that, he says it is natural to have teething problems when a new government takes over from one that has ruled for some 60 years.
“There is a price to be paid but over the longer term, some good will come out of it, hopefully, ” he says.Siders says this is a passage the country has to go through. Over the longer term, hopefully it will lead to some good. Over the near term, “investors and buyer are expected to defer decision-making because there is no clear direction.”
On the coronavirus (Covid-19) outbreak, Wong and Siders concur that this too would be temporary despite loud global headlines that the number of cases are escalating in Italy, Iran and South Korea.Siders said Covid-19 will impact Malaysia’s industrial property sector if the outbreak worsens. It has already impacted the retail and hospitality industry.
People are going out less and dining at home more. This was obvious during the recently-over Chinese New Year period when banquets were cancelled.
A different view
A third source, however, provides a different view.
The industry source, who declined to be named, says whoever emerges as the new housing and local government minister has to focus on the numbers instead of hype.
The source is concerned about contagion on a global level, that a pandemic-induced global recession would impact Malaysia.
Although Malaysia has 22 cases and no fatalities, in other parts of the world, the number of cases and deaths are rising.
“I don’t even want to talk about sales at the moment.
“There will be launches, but this will be gradual, ” he says, adding that he expects activities to slow further.
“People are not buying so there is no reason for developers to actively launch (their products).”
On rental, he expects this to be affected, both retail and residential.
“If the Covid-19 situation deteriorates, small businesses in the food and beverage sector may close. Already, I expect people to have trouble paying the rent, ” he says.
“As for the market recovering, we can postpone that to three to four more years, maybe five, ” he says.
“It depends on how the political situation unfolds, if we can get it right, ” he says.
He says the property sector is “not bottoming out” as some would like many to believe.
“It is going to slide further, for all sectors within the property industry. We are not seeing the light at the end of the tunnel and developers are also cautious.”
If the economy is not doing well and it has not been doing well, how can the property sector perform, he asks.
If Covid-19 is a double whammy, the current political situation is a triple whammy.
The source says he understands there is “a reshuffling of the cards” at the moment, but “put the right people in the right portfolio and we will be fine.”
