Property People & Place (YES) asked 3 property experts on how 2019 fared.
Q:2019 has been another slow year for the property industry after a few years of markets slump. Are there any bright sparks?
“The market will continue to be sluggish if the government and private sector initiatives are unable to speed up the growth rate.”
Agnes: Investors who invest in property for investment purpose never have an urgency to commit to an investment until they can visualise that the investment has growth potential. Growth potential in a property investment comes from the state of the growth of the businesses that directly or indirectly drive the property sector. For example, with the current unrest in Hong Kong, Malaysia, which is perceived to be one of the safest living locations has become one of the sought-after property investment destinations for the Hong Mongers. However, because the driving factor of this investment is driven by ‘safety” instead of growth potential, you won’t see a significant influx of foreign property investors into Malaysia that will help stimulate the property market going forward. The market will continue to be sluggish if the government and private sector initiatives are unable to speed up the growth rate.
Budget 2020 has many initiatives to stimulate the economy – increased investment into the digital infrastructure, Visit Malaysia 2020, Human Capital Development and attractive incentives for Foreign Direct Investment to create job opportunities for Malaysians. What we need now is the government to take an aggressive approach in delivering all these initiatives and implementing them effectively in order to stimulate the economy which will in turn stimulate the property market.
“We didn’t do anything right; it’s just that whoever are with us are worse off than us.”
Chris: 2019 is effectively a home ownership year – generally, a big sale is going on with almost everyone giving a 10% discount. It’s also a year where government agencies are competing with private developers.
We didn’t do anything right; it’s just that whoever are competing with us are worse off than us, for example, our weak ringgit makes our property market more affordable compared to Thailand or Indonesia. Another indicator of a slow year is the increasing number of auctions; not only is the list of properties for auction getting longer but a lot of these properties are coming from the same few developments. It means the market has a lot of speculators.
“Now,all those who wanted to buy have already bought and all those who wanted to rent houses or factories have already done so.’’
Koong: It’s been generally slow, A growing property market depends on two factors: population and business activities. Our population is not growing much while business activities are quite stagnant. Previously, some 20 years ago, developers were building to match requirements – and people and businesses were acquiring for their needs. Now, all those who wanted to buy have already bought and all those who wanted to rent houses or factories have already done so. So, we don’t see new ‘acquirers or renters’, Furthermore, due to a lack of a large consumer base, business hotspots keep moving according to the latest trendy area.
For example, Bangsar Telawi area used to be hot, then it moved to Mont Kiara followed by Hartamas and Publika.
Nowadays, a lot of people are very cautious not because they have no money but more because they know the holding costs are very high now unlike previously. Further, if you can’t rent out, you have to exit or wait for another cycle.
There are exceptions however. Lots of developers have reduced prices (with correspondingly smaller sizes), and priced them between RM300K – RM500K so they get a lot of buyers as this is more affordable to the majority of the population. Due to the high demand, many more developers build for this segment causing an oversupply, for example, thousands of units have come up in Cheras. Who’s going to stay there? Rentals will fall further causing a drop in investment. At the higher end of the market, there are those with money who want exclusivity, that’s why Desa Parkcity sky bungalows costing RM2.5 mil can sell out 70% within two days while properties in the price range of RM500K – RM850K have few takers.
So, the takeaway is that the lack of population, and different demand for different market segments have caused a gaping mismatch.