Brighter prospects for Malaysian property at the end of the tunnel!
Malaysia showing positive signs of economic recovery and what it all means for the property industry
Malaysia's economic recovery prospects have lately become brighter and more robust with an increase in foreign capital inflow driven by positive developments under the National Recovery Plan (PPN). Foreign investors are now the principal buyers of the ringgit bond with net investment totalling RM6.6 billion. This is a clear testament to investors and fund managers' confidence in the country's growth prospects as well as continuity of government policies. This will further strengthen PPN, which has improved the overall public health situation and perspective. With the National Covid-19 Immunisation Programme solidly in place, recovery of all economic sectors including real estate can be realised ultimately!
A lukewarm sentiment towards property
The pandemic has resulted in a lacklustre response among many Malaysian homebuyers. The loss of employment coupled with stark reduction in household income contribute to the general reluctance of many Malaysians to splurge money on properties. With all these uncertainties, sentiments generally remain lukewarm despite a slew of incentives announced by the government under Budget 2021. Most Malaysians have chosen to defer or postpone their property purchases owing to the pandemic amid an uncertain market and an unstable income. Moreover, homeowners are tightening their purse strings owing to relatively high property prices as well as the lack of cash flow. Furthermore, securing loans for a home is still a hassle.
A property revival on the horizon?
A return to the heydays of property boom a decade is pretty unlikely as market recovery is painstakingly slow and stagnant. Most of all, the issue of oversupply must first be resolved. As the economy fully recovers by next year, Malaysians are largely expected to go on a property hunt as well as shopping spree. Ushering foreign direct investment (FDI) to the country is also perceived as critical in boosting the property market. Foreign investors are known to invest in high-value assets and properties. Investment opportunities and equality are cited among the key factors that generate employment and business opportunities. The overall national economic growth is largely expected to be slow or sluggish due to the lack of effective and clear-cut government policies in managing the pandemic. More property overhang is also anticipated as the affordability gap increases with decreasing household income. Despite a surge in vaccination nationwide, spending on property will be delayed as citizens grapple with economic uncertainty and political instability. Meanwhile, Malaysia has witnessed a paradigm shift from traditional offices and retail businesses to remote working and online shopping which will drive growth in a new normal of virtual transactions. Thus, technology shall play an increasingly important role to elevate digital marketing and e-commerce platforms towards property recovery.
Revitalizing Malaysia’s property sector
The Malaysian property industry has been hit hard by Covid-19. With perpetual restrictions put in place since March last year, the industry itself has slowed down rather significantly. Buyers have postponed their purchases due to uncertainties revolving around the pandemic whilst developers have found it hard to meet deadlines as supply chains have been disrupted by flip-flip policies and SOPs. The reintroduction of the six-month moratorium on bank loan repayments somewhat offers relief to cash-strapped homebuyers. As such, we may see more residential supply making its way into the secondary market, resulting from those who wish to cash out on their property investments to alleviate current financial burdens. Based on Bank Negara Malaysia’s (BNM) monthly loan application data, the value of home loan applications has grown substantially as many consumers are still searching for property bargains amid a pandemic. The upward trend of approved home loan applications is promising indeed. It proves that Malaysians are still interested in purchasing homes either for own-stay or investment purposes. For the real estate sector to thrive again, there are key trends that will impact the sector in the months ahead. For starters, BNM has kept its overnight policy rate (OPR) at 1.75 percent in its updated review in November 2020. This truly augurs well for property seekers as continual low interest rates means burden-free financing in owning a property. The reintroduction of the HOC is also expected to keep the property industry buoyant beyond 2021 with increasing innovation focusing upon digital solutions targeting tech-savvy Malaysians.
Technology to drive property forward
Digitalisation initiatives by key property players have accelerated the capacity to market products and engage buyers via online platforms. Interaction with sales representatives to facilitate the transaction with enhanced convenience is paving the way forward for developers to market and sell their units in the immediate future. This progress is timely as millennials who have grown accustomed to e-commerce are now a large segment of the home-buying market in Malaysia. This trend is expected to grow beyond 2021 as property developers and real estate agents begin to realise and understand the benefits and advantages of a strong digital presence as a long-term strategy. Consumer demand has improved dramatically as property seekers are warming up to the concept of online property purchasing. Interactive viewings in real-time such as live webinars, online videos and augmented virtual reality (AVR) are becoming the norm in real estate transactions. Smart developers have also acknowledged and embraced the significance of a social media presence in marketing the latest products and new launches.
Light at the end of the tunnel
According to a recent property survey, it is found that the majority of responders are looking forward to making-over their homes after spending so much time indoors during the pandemic. Most have opted for renovations, owning a new house or moving elsewhere. The craving or desire to own a home is particularly prevalent with renters which comprise young couples, newlyweds and millennials. Having undergone a series of prolonged lockdowns for almost two years, Malaysians have come to realize the need or requirement to have their own space especially in the era of working from home. With favourable lending rates coupled with positive future outlook, Malaysia is currently making a comeback in real estate as capital appreciation is gradually gaining momentum. Long-term prospects are also pretty encouraging taking into consideration Malaysia as an attractive investment destination as well as homeownership hub. In conclusion, keep your fingers crossed as Malaysian property is coming back with a bang as early as 2022, let’s just hope and pray!