Impact of RCEP on property market

signing of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade agreement, will contribute towards sustaining Malaysia as a preferred trading hub and investment destination.

RCEP will promote and facilitate international trade among the 15 participating countries in Asia-Pacific.

The expected increase in free trade among the participating countries will have a significant impact on the Malaysian property market.

Higher trade and economic activities will impact on the occupation, investment and development sectors of the property market.

Real estate space is a local input in the production and supply of goods and services.

Increased exports lead to expansion of domestic production.

Increased domestic production increases the demand for industrial space.

Imports also have an impact on demand for real estate space.

Goods imported need to be stored and distributed through warehouses and logistic properties.

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These goods are then displayed and marketed at various outlets thereby increasing the demand for retail spaces in retail malls.

Regional trading bloc and trade liberalisation will encourage foreign direct investments (FDIs).

These FDIs will create demand for industrial land and buildings.

New capital investments will spur demand for more financing activities from the banks.

Once the plants and machines are in operation, they will create employment and demand for other factors of production.

Higher economic growth will drive the capital market which will attract more foreign investment fund flows into local equities.

With increased economic activities, occupation demand for real estate space will cause rental increase.

With inelastic new supply, potential future rental growth and prospective capital appreciation, investors will start to invest in real estate leading to an active investment market with more participation from the institutional investors.

Developers will react to prevailing rents and capital values when they appear to signal a profitable opportunity.

If prices rise, more developers will respond to these signals and the aggregate flow of supply into the market increases.

These new spaces will meet the requirements of the occupiers and investors such as floor plate size, specification and network connectivity.

Real estate service providers such as property consultants play an important role in the whole process by aligning their service standards to the requirements of regional and global clients.

It is envisioned that RCEP will open up markets and help in the post-Covid-19 recovery.

With increased economic activities, it will give rise to more derived demand for various real estate spaces thereby leading to an improved property market performance in the future.

Prof Sr Dr Ting Kien Hwa Centre of Real Estate Studies Faculty of Architecture, Planning and Surveying Universiti Teknologi Mara