Penjana timely, apt to address property gap
As Malaysia recovers from the Coronavirus Disease 2019 (Covid-19) crisis, we’re seeing increasingly gloomy macro indicators. Gross Domestic Product (GDP) projections have gone from 4.6 per cent to negative 4.7 per cent for 2020, with unemployment forecasts rising to 5.5 per cent.
Sheldon Fernandez
June 16, 2020
KUALA LUMPUR: PropertyGuru lauds the government’s inclusion of timely and relevant measures addressing property gaps in its recent short-term economic recovery package (ERP) – the National Economic Recovery Plan (Penjana), as much-needed catalysts for the market amid larger unemployment and recession woes.
In a statement, it pointed out that the reintroduction of the Home Ownership Campaign (HOC), and revised Real Property Gains Tax (RPGT) and margins of financing for third housing loans onwards serve to shore up sentiment while unlocking pent-up demand, both crucial measures as the nation moves towards a new norm under the Recovery Movement Control Order (RMCO).
“As Malaysia recovers from the Coronavirus Disease 2019 (Covid-19) crisis, we’re seeing increasingly gloomy macro indicators. Gross Domestic Product (GDP) projections have gone from 4.6 per cent to negative 4.7 per cent for 2020, with unemployment forecasts rising to 5.5 per cent,” said PropertyGuru Malaysia country manager Sheldon Fernandez.
“This will naturally impact property, as many Malaysians defer home purchases while focusing on surviving day-to-day.
“However, the deficit spending approach taken in the ERP is an established strategy in addressing potential recession trends, laying the foundation for a return to pre-Covid-19 levels for the market.”
Pre-crisis asking prices were on the uptrend, with the PropertyGuru Malaysia Property Market Index rising by 0.63 per cent to 89.46 in the first quarter of 2020 (1Q20), along with strong interest in the central region. In May, it noted that web traffic for properties priced RM501,000 to RM700,000 and RM701,00 to RM1 million saw the highest increase on PropertyGuru.com.my, at 10.4 per cent and 12.7 per cent respectively.
Similar increases were seen in condominiums (23.5 per cent), service residences (19.2 per cent), 3.5-storey terraced homes (28 per cent) and SOHO units (20 per cent), indicating healthy demand for these property types as property bounces back postcrisis. However, search patterns moved away from the central region, with Johor (22.5 per cent) and Penang (19.3 per cent) as prime beneficiaries.
Property provisions in the ERP serve to unlock this demand, it said.
“The upward revision of 70 per cent margin of financing limits for third housing loans onwards for RM600,000 properties and above is particularly timely, given potential interest among investors with financial leverage for strategic high-rise and terrace projects,” it noted.
In addition, the RPGT exemption for disposal of up to three residential homes per individual until December 31, 2021 is a boon for sellers and upgraders, as well as those seeking emergency funds, PropertyGuru viewed.
“Regarding the HOC, its mandate up to May 31, 2021 could help address ongoing residential overhang concerns, having sold 31,415 units worth RM23.2 billion in 2019. The overhang declined to 30,664 units worth RM18.82 billion in the same year, though this downward trend will likely be impacted by the Covid-19 crisis,” said Fernandez.
“However, some clarity is required when executing these provisions. Do stamp duty exemptions apply to new launches as well as overhang units? If so, it may be difficult to reduce the overhang even with HOC 2020.”
Citing a study of HOC 2019’s impact on the segment, property data analytics and solutions provider PropertyAdvisor noted that the extension of the HOC’s stamp duty waiver to the subsale market may benefit firsttime home buyers.
“Analysing the data, we found an increase of about four per cent in first-time buyer activity within the sub-sale property market as a result of the campaign. This was likely due to increased marketing and media coverage of the property market in 2019, as headlined by HOC 2019 itself,” said MyProperty Data, operator of PropertyAdvisor platform, chief executive officer Joe Hock Thor.
More than 60 per cent of the sub-sale market in 2019 consisted of first-time buyers. Despite promotions largely centred on new project sales, Thor states that the HOC likely catalysed interest within the segment, leading them to seek potential bargains in the sub-sale market amid a favourable financing environment.
It said, the financing environment has only improved in 2020, with interest rates at a historic low following a series of Overnight Policy Rate (OPR) cuts by Bank Negara Malaysia. However, it noted that larger economic issues have created instability in the job market, which may see increased demand for rental properties as home seekers play safe, placing upward pressure on rental prices in the long term.
“Clearly the signs are that we’re in a buyer’s market – but with so much uncertainty, we may not see demand returning to pre-Covid-19 levels among first-time buyers in the sub-sale market until at least 4Q20. This would be accelerated if stamp duty waivers are extended to the sub-sale market,” added Thor.
He also believed that buyers looking to purchase a home at this current juncture might be greeted with better options, but that it is vital to undertake due research.