Impact of Politics & Covid-19 Pandemic on Property

The Impact of The New Political Landscape and Post Covid-19 Outbreak On Real Estate Navigating The Perfect Storm of Unexpected Crises

The first few months of 2020 have literally brought not only the nation of Malaysia – but that of the entire world to its knees as the Covid-19 virus turned into a global pandemic resulted in global lockdowns and the shutdown of international borders.

Locally, the political saga also saw the upheaval of a previous rule in place of a new government structure. And, even before the dust could settle on the political scenario, the restricted Movement Control Order (MCO) came into effect from March 18, 2020 which saw a further extension in the Conditional Movement Control Order (CMCO) in several phases which further added insult to injury in the containment of the deadly virus.
Inevitably, the impact on real estate and the overall economy – given that businesses have come to a grinding halt has been tremendous in its magnitude of ramifications. YES (PropertY PeoplE PlaceS) Paper gathered the insights of industry experts to provide their views on what lies ahead. Here’s the verbatim candid take from experts in the industry following the several extended MCO orders and what would possibly surface in the scenario post-MCO, with the Recovery Movement Control Order (RMCO) now being in force.

Brian Koh – Executive Director of Nawawi Tie Leung

On a fundamental level, the property market is driven by economics but politics is never too far from it. For instance, in the case of the successful re-election of President Clinton for his second term, there was a famous saying, “It’s the economy, Stupid!” And, now President Donald Trump’s bid in November will be based on how well the economy fares and its effect on the voters. Politics drive economic policies. As such, politics have direct or indirect impact on all markets including the property sector. These policies include interest rates, financial  liquidity, bank reserves, lending margins and real estate industry regulations.

Notwithstanding the fact that some of these decisions are made by the central banks – they are in theory, politically independent of the executive arm of governments. Other direct policies include foreign ownership limitation, Bumi quota, Malaysia My Second Home (MM2H) regulations, house ownership goals, taxes, etc. Politics no doubt have had an impact not only on property but also the economy, as seen in how foreign institutional investors’ have shut Malaysia off the radar due to governance issues arising from the past 1Malaysia Development Berhad or 1MDB clad controversy.

In many Asean countries such as Thailand, the Philippines, and Indonesia, there are strict restrictions on foreign ownership when it comes to freehold and/or landed properties. These stem from past political fears during the colonial era in that allowing unrestricted land ownership will start a neocolonialisation of the countries concerned. In communist countries – not withstanding that theoretically, the fact that all land is owed by the proletariats – political decisions are made based on embracing globalisation that have even bended rules to ensure that these countries do not miss out on the benefits of capitalism by issuing shorter leases on land to enable foreign investments to set up factories and invest in properties.


Here are two personal case studies:

In the early part of the 1998 Asian Financial Crisis, a major foreign investor was in the midst of signing a joint venture (JV) agreement pertaining to the Mid Valley Mall. However, due to the political decision to impose capital control and peg the Malaysian Ringgit – the deal was called off. A Malaysian Public Limited Company (PLC) was about to buy into a multi-million pounds London office project and was undertaking due diligence but when the Greek Debt Crisis broke out in 2009, the proposed deal was called off. Indirectly, this debt crisis was the result of Greece joining the European Union (EU) without fully complying and meeting its financial commitments for membership.  The 2008 Financial Crisis in the US was an indirect result of the Democratic Party government’s political decision to pursue house ownership amongst the lower income group that resulted in banks aggressively lending to those who are ineligible or are not able to sustain repayment in the long term.

In Singapore, The People’s Action Party (PAP) government in its early days, embraced a strong Housing & Development Board (HDB) building programme to ensure that the common people were able to afford to own homes so that there is a shared interest in the country’s prosperity. Thus, Singapore currently has one of the highest home ownership ratios in the world at 91% – a high rate even as compared against developed countries.

In summary, politics and economics are intertwined in a circular embrace of each other like the structure of a double helix of a DNA. Thus, all ill-conceived political policies will have unintended adverse consequences on the market.

Charles Tan – Executive Editor of independent property blog

Covid-19 has brought a cooling down amidst the political uncertainty just weeks prior to the pandemic. Instead of the debate on who has the numbers, the debate is now centered on whether the current government is doing enough to halt and arrest the Covid-19 pandemic.

I think this will continue for a while more. I do not think many property transactions were due to politics as most property purchase decisions were made based on the potential of the investment, on the stability of the economy and even having access to funds because not many are buying property with cash. Politics will shape the sentiment with regards to real estate but if we ask around: “Did you buy that property because of the new government?”- the answer will almost always be a “No”. However, the MCO and CMCO have really affected the property market. And, in everyone’s mind – the big question is: “When will this Covid-19 pandemic be over?’ If there is no certainty, there is not going to be much viewing and without much viewings – there will be no transactions. So, we will have to watch to see what happens – not just in Malaysia but the world for what will happen next.

Chan Ai Cheng – General Manager of S.K. Brothers Realty (M) Sdn Bhd & the President Elect of the Malaysian Institute of Estate Agents (MIEA)

While political stability has a big role to play in the overall scheme of operations, how well the property market performs really depends on market confidence, which comes from the performance of the economy.  At the end of the day, it comes down to market confidence.


Faizul Ridzuan – Chief Executive Officer of Far Capital Sdn Bhd

Essentially, whatever impact we have politically, is often
short term.

The current politics basically won’t have any real impact on the property market from the third year onwards but yes, there will be some kind of impact. And, we will know in May the true impact. For example – if the Government survives the vote of confidence or vote of non-confidence. But mark my words, irrespective of whether the current Government stays or not – most likely, the country would go through an economic recession in the next 12 months. And that to me, is far more of a concern rather than the instability of the current Government.

Sr. Kit, Au-Yong – Registered Valuer, Property Manager & Estate Agent, of Asiacap Valuers & Property Consultants Sdn Bhd

Business has obviously put to a halt due to the lockdown stemming from the preventive move to contain the spread of Covid-19 staring from March 18, 2020, and given the other extended deadlines from the original MCO.

The operations have to continue, especially with regards to property management for condos and strata properties.
But with a lot of disruptions due to the MCO and CMCO, there will be some impact to real estate indefinitely, which will be seen
in the aftermath of the return to normalcy after the quarantine period.


*Information and opinions expressed in this issue are accurate at the time of the interview.

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