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8 reasons why market will not stage a rebound in 2020

It’s an uphill struggle for the property market to stage a rebound this year. Chief Editor Jan Yong lists 8 reasons why.

Despite the many incentives by the government to stimulate the property market (see below) due to the pandemic’s negative effects, the downward pressures are too strong to see a rebound in prices this year.

1. Overriding political concerns with a general election expected at any time (probably November). Political uncertainty is not conducive to long-term plans nor inbound foreign investments.

2. Covid-19 pandemic is only expected to recover fully in 2021 or 2022, or maybe never just like AIDS where a vaccine has yet to be found. Globally, fear of a second or even third wave will slow down global demand and supply. Global commodity prices especially oil are projected to trend lower.

3. The six-month loan moratorium will end on 30 September except for individuals who have lost their jobs, on nopay leave or have had a salary cut. What happens to those who do not fall into these categories? As of June, there was an estimated 1 mil job losses. Expect more auctions coming due to many more desperate sellers as more companies retrench staff or close down.

4. Continuing oversupply / overhang that is not being adequately addressed.

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5. It’s still hard to get a property loan especially for B40 (lower income) group. Banks are also skeptical about valuations due to perceived overpricing due to cashbacks/ discounts except for subsales where banks’ valuers will give a more realistic i.e. lower, value. Housing loan applications fell by 72% in April during the MCO.

6. The proposed new Residential Tenancy Act being drafted now ostensibly to control prices and prevent tenant discrimination is biased in favour of tenants. It takes away the freedom of owners and landlords to choose tenants whom they judge to be reliable. It will have a negative impact on investors sentiment.

7. Malaysia My 2nd Home (MM2H) programme is frozen – this does not bode well for the market as the programme generates about RM4.9 bil for the economy every year. Besides, the property ownership rate of foreigners in Malaysia is very low. The revisions are expected to lay down tighter rules.

8. The extension of the Recovery Movement Control Order (RMCO) to December 31st, 2020 has a dampening effect on the market. Overall, developers will wait till 2021 to launch projects and buyers will hold off buying during this period except for deep-pocketed and opportunistic investors. Belt-tightening is the order of the day due to the prevailing uncertainty.

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