The real estate market is expected to rebound in 2022
As Malaysia braces for endemicity after a nearly two-year struggle against the Covid-19 pandemic, all eyes are already on what 2022 will look like for the local real estate market.
At the 2021 Malaysian Property Virtual Summit earlier this week, the consensus is that the market next year will continue on its way to recovery and hopefully reach pre-pandemic levels.
Rahim & Co research director Sulaiman Akhmady Mohd Saheh said the gradual reopening of the economy will help boost the real estate sector.
“For the residential market, the standardization of post-pandemic standard operating procedures and the high vaccination rate in 2022 will be the boost to bring transaction activities back to pre-Covid-19 levels, as physical movements and housing campaigns are resuming. “
Additionally, Sulaiman says increasing vaccination rates, easing physical containment measures and accumulating financial savings from the 2020 spending cutback period will boost consumer confidence.
“Strengthening the affected labor market will also be key to ensuring income security and stability.
“Advances in infrastructure megaprojects, such as the East Coast Rail Link, LRT3 and the Pan-Borneo Highway, will also catalyze greater urban development and improved accessibility. “
From 2022, Datametrics Research and Information Center chief executive Pankaj Kumar said domestic interest rates are expected to remain stable and support market activity.
“The real estate market today is a buyer’s and tenant’s market. However, household income will need to return to 2019 levels and increase, before accessibility can be improved. “
To further stimulate the market, Pankaj hopes that the current Home Ownership Campaign (HOC) will be extended until 2022 and will also include the aftermarket.
Currently, the HOC only applies to primary market properties.
Meanwhile, Sunway University economics professor Yeah Kim Leng said the local real estate market is expected to rebound in 2022, based on stronger economic performance forecasts for next year.
“With the economy expected to grow 6% next year, the performance of real estate-related service industries is expected to improve in 2022, but they will be less dynamic than pre-pandemic levels. “
Nonetheless, Yeah says the Malaysian real estate market remains resilient, despite the “second worst recession of all time” in 2020.
“We expect the outlook for housing demand to strengthen following an economic recovery in 2022, the wealth effects of commodity prices and stock market gains, the continued bank landing, as well as demographics. positive and household formation. “
Yeah adds, however, that there is still an insufficient supply of affordable housing and an oversupply of high-end units being launched.
This oversupply of units has led to a serious over-indebtedness situation that the Malaysian real estate market has struggled to resolve for many years.
According to the National Property Information Center (Napic), a total of 31,112 overhanging units worth RM20.09 were registered in the first half of 2021.
This is an increase of 5.2% and 6.2% respectively in volume and value, compared to the previous semester.
The serviced apartments sub-sector, meanwhile, registered 24,064 overhang units worth RM20.41 billion in the first six months of this year, indicating a marginal increase of 1.9%. in volume.
However, the value fell by 10.2% compared to the previous semester.
At the same time, unsold goods under construction recorded 42,358 units, an increase of 20.1%.
To address the country’s overabundance situation, the government launched the HOC in January 2019.
The campaign, which was to last six months, has been extended for another year.
It has proven to be a success, having generated sales totaling RM 23.2 billion in 2019, exceeding the government’s initial target of RM 17 billion.
The government reintroduced the HOC in June last year as part of the Penjana initiative to boost the real estate market after being affected by the Covid-19 pandemic.
The campaign has been extended until the end of this year, with real estate consultants and developers fully supporting the move.
In March of this year, during the Real Estate and Real Estate Developers Association’s 2021 Real Estate Market Briefing, its chairman Datuk Soam Heng Choon revealed that since the reintroduction of the HOC last June, a total of 34,354 residential units valued at RM 25.65 billion had been sold as of February 28, 2021.
To reduce the overhang situation, Pankaj says developers need to focus on what the market wants.
“Failure to do so will result in low turnout and increased overhang. They have to hold back when launching new products, not realizing that the market is soft.
“In this case, the authorities should control the distribution of new development orders.
“Everyone – developers, local authorities and financiers – should work together rather than in isolation. “
RHB Research’s regional property manager Loong Kok Wen said it was not easy for developers to shut down a project.
“If you end it suddenly, it may have implications for other support industries.
“However, what can be done is to set up some sort of database, where, before a development, the parties involved can assess whether there is sufficient supply in a particular location.
“With this database, the local community will be able to know if they need to approve a project in a particular location.”
Khong & Jaafar Managing Director Elvin Fernandez also said that you can’t just randomly freeze a particular project once it has been given the green light.
“It’s like closing the stable doors after the horses have locked. “
Elvin believes that the power to remedy the debt distress lies with local authorities and banks.
“Local authorities should require independent market research from the developer, before providing a development order to developers.
“Likewise, banks should also require the same (independent market research) from developers before approving a loan.
“Consequently, these two organizations (local authorities and banks) must play a role in determining the offer.
Meanwhile, TA Securities, in a recent report, says it predicts the upcoming 2022 budget will primarily be of use to low- and middle-income people, as well as new owners.
“We also hope for more measures to ease the burden on homeowners by extending tax exemptions on real estate gains, as well as lower rates.
“We are also planning more user-friendly measures for real estate developers and foreign buyers to stimulate market activity. We do not anticipate any new drastic tightening policies, as this would derail the recovery in the real estate sector. “
The 2022 budget will be tabled on October 29.