Contributed by the Triterra team
Every year has its defining moments – in 2020 – it would have been the Olympics, Brexit, the 36th ASEAN Summit, the long-awaited release of Marvel Studio’s Black Widow movie… the list goes on. The last six months, however, have shown us that what we plan for ourselves is not always what life has planned for us.
The Covid-19 pandemic that swept the globe in early 2020 has forced nations to irrevocably change the way their citizens conduct themselves and live.
The new normal
From what seemed almost unthinkable, if not impossible – millions placed under home quarantine – happened overnight. A new normal where everyday activities are curtailed; social circles limited to who we live with; living rooms transformed into classrooms and conference rooms; Zoom and Google Hangouts the main avenues of meeting safely.
What we know as ‘what can be done’ has been reframed using new-found capabilities to innovate, collaborate and succeed at a rate assumed to be impossible.
We saw automobile manufacturers repurpose its production lines to make face shields for front liners; perfumeries redirect to produce hand sanitisers; fashion brands manufacture personal protective equipment (PPE) and, face masks printed on 3D Printers, all within days and weeks. The same is true of the property market.
Property generally takes some time to liquidate as many factors go with buying and selling. This ‘lag’ may allow time for the economy to recover and shield the property market. Good examples would be the economic crises of 1997 and 2008.
Blue-chip property prices tend to hold up during such times or may experience a drop (but not as drastic as one would expect). Owners of prime properties that may be yielding 5% – 6% returns will also have no reason to sell because of lower interest rates.
Property is also still very much a touch-and-feel product experience for purchase consideration. Fears of a second wave may affect the buying sentiment and lead to a temporary low in transactions as we see out 2020.
“We believe the local property market may see a surprise uplift due to expected recovery in economic growth next year as well as the possibility of moratorium extension and the government’s budget for 2021,” added Triterra CEO Christopher Lim.
The surprise uplift
Going forward, there may be a short-term slowdown in transactions but a catch-up (pent-up demand) should cause an uptick in demand by late 2020 or early 2021, as those planning to sell or buy were inhibited earlier.
There are already projections by the International Monetary Fund (IMF) that Malaysia may record a 9% GDP growth in 2021. A more conservative projection stands at approximately 5% which is also a very healthy level.
The Government’s sustained ‘cooling measures’ (2010 – 2019) that flattened the number of transactions curve to an all-time low in 2018 was somewhat lifted at last year’s Budget (Year 2020).
These factors may give Malaysia’s property industry the boost it needs. For the first time in 10 years, there are opportunities to be found e.g. revision of the base year of acquisition for RPGT from 1 Jan 2000 to 1 Jan 2013 and a lower threshold for foreign ownership.
Coupled with the granting of (most of) the real estate sector’s wish list drawn up by the Real Estate and Housing Developers' Association and associated non-governmental organisations during the lockdown, Malaysia is well on its way to a healthier and sustainable real estate market.
These incentives include the waiver of stamp duty for properties for RM400,000 to RM2.5mil, waiver of RGPT for three properties sold within the year, removal of the maximum loan to a value ratio of 70% for the third property; support for the reinstatement of the Home Ownership Campaign (HOC).
A fundamental need
“The immediate silver lining for the property market is the moratorium offered by our financial institutions. Kudos to our Government and Bank Negara for their proactive approach to stabilise the property market during these challenging times,” said Christopher.
A much-needed breather for all borrowers and lenders, the moratorium is also a boon for the T20 and M40 income groups who remain relatively (and financially) immune to the Covid-19 Pandemic.
The property market may see this group diversifying their portfolios with liquidity freed up. They may consider investing in different asset classes such as shop house, office space and even retail lots – taking advantage of lower valuations and the rise in distressed assets coming into the market.
“The financial institutions are strong, our population has grown from 20 million to 33 million from the year 2000 and more importantly, our economy is much more diversified now,” said Triterra chairman Datuk Seri Michael Yam.
Opportunity in crisis
“China’s divorce spike is a warning to the rest of the locked-down world. Filings started rising and reaching record-highs in March as couples began emerging from weeks of government-mandated lockdowns intended to stop the spread of the novel coronavirus,” according to Bloomberg Business Week in March.
If absence makes the heart grow fonder, the opposite might be true of too much time spent together at home. Early market research shows that the lockdown itself has become a contributing factor in residential purchases since our Prime Minister’s announcement to ‘duduk diam-diam di rumah’ earlier this year.
Too much time spent in close quarters under quarantine; accommodating familial idiosyncrasies; juggling school and work priorities with no definitive end in sight has sparked renewed interest in homeownership. Facebook, virtual tours, 360° videos and Zoom marketing being the primary drivers in this new wave of purchasing.
Making it work
They say there is a bright side to every crisis. Across the board, there will be a paradigm shift in post Covid-19-era buildings that developers cannot ignore. Consumers will expect spaces with features that safeguard them from exposure to viral infections and facilitates Work-From-Home capabilities.
Efficient facial recognition and temperature check cum data collection devices for quick access through guardhouses or lobbies; bigger lifts, larger spacing of urinals and toilet cubicles, UV lighting and mist dispensing sanitiser gadgets in public areas; automated or contactless operated lift hall call panels, doors, even light switches and electrical appliances will have to be standard features.
Properties that are 5G enabled and have larger broadband capacity will stand out. Design and layout of all properties, be it industrial, commercial or retail will also be repurposed with screens and greater distance between seats and tables to mitigate community spread.
Property is both a need and an investment. With the strong support of the Government and vigilant consumer sentiment, the property market can and will adjust in these unchartered waters of Covid-19.
The well-timed moratorium staved off panic-selling and obvious consumer behavioural change. According to Carey Real Estate Managing Director, Nixon Paul, “Demand for residential properties between RM500,000 and RM1 million and commercial (above RM2 million) are encouraging, amid the ongoing Covid-19 crisis.”
The future in a post Covid-19 world may be full of uncertainty but it would be safe to say that property is definitely a confirmed positive case.
The virus has accelerated the case for change, reinforced the importance of home and family, fast-tracked the pace of digital transformation and more importantly, will shape the way governments and developers plan and build for the future.
That said, it is probably the best time to look around for value proposition assets, one that meets the fundamentals of Location-Concept-Pricing. That, however, is a topic for another day.