What will this Year of the Ox bring about? That is the question burning on everyones mind as the horrific 2020 year is done away with. In this issue of YES (PropertY PeoplE PlaceS), we highlight the feedback of industry veterans from various sectors of expertise on their thoughts concerning this year.
by Yvonne Yoong
I think 2021 is a year of opportunity as the year 2020 was marked by the start of the pandemic. And, while the general view on the ground is that 2020 was a bad year, the general perception is that 2021 will be worse. However, while people may perceive 2021
to be worse, if you think about it, it’s also a year of opportunity. For us, the focus is on property tourism whereby we are talking about crossing borders but not physically. Therefore, we won’t depend on the opening up of the borders. Instead, we have to think of utilising the power of the media to do our business online.
Last year, we had to think out-of-the-box during the pandemic by introducing a lot of international brands into The Sail. These include Fashion TV Paris, Memorigin Hong Kong and International Workspace Group (IWG).
Last year, we did this so that when the brands come in, we will launch the project in full force.
People from around the world are familiar with the international brands so the confidence is there. Last year, there was the moving in of international brands to Kuala Lumpur. So this year is dedicated to the implementation and pouring in of international brands.
Therefore, 2021 will see the implementation of The Sail and the various brands’ success. That’s why there are online events and the cross implementation of the brands. We are still inviting the Japanese, Europeans, Chinese and Hong Kong investors to come to Malaysia
through international brands and our branches overseas as one-stop centres will be more vibrant this year.
Hong Kong investors to come to Malaysia through international brands and our branches overseas as one-stop centres will be more vibrant this year.
And, we can save the time spent travelling to conduct meetings online. Even though we have ideas to stimulate the existing economy from all the plans laid down from Jan 2021, we are in line with our vision and objectives.
Last year, we managed to maintain but this year, we aim to maintain and breakthrough riding on the achievements in 2020.
We envision Melaka will become a trade centre with The Sail offering wellness, greenery,
education and five-star hotel. Globalisation and good brands internationally will make The Sail in Melaka a historical, cultural, lifestyle and fashion hub.
The hospitality sector is expecting some rebound in 2021. In 2020, The Covid-19 pandemic shook the lodging industry particularly hard, and turned many hotel businesses upside down.
However, every crisis presents opportunities and if you’re able to see it when it happens. We can be certain that recovery is inevitable. Tipping points in the coming months will include cleanliness, customer trust, and disruption from short term rentals, Online Travel Agencies (OTAs) and other hotels. The use of Bandwidth, Artificial Intelligence (AI), mobile, and touchless technology will continue to drive engagement and delight guests. There’s a tremendous opportunity to use data and technology to enhance opportunities. For example, in using AI to optimise room rates as well as attracting new customers. In summary, people would still want to travel, provided they are safe and have the best values based on their preferences. Using new technologies is strategic and integral to the success of hotels in the coming near future.
As we step into 2021 and, with the continuous battle against Covid-19, many
have come to realise the importance of foundational health, that should be prioritised even when times are favorable. As the adage goes, “Prevention is better than cure”, which highlights the importance of preventive medicine in healthcare. While international borders remain shut, we are optimistic that once vaccines become available, Malaysia, with its diverse culture and professionalism in healthcare will continue thriving once again as a hotspot for medical tourism.
The property market ended 2020 with brisk activities as seen in developer launches and a pickup in secondary sub-sale properties in the residential and industrial sectors. The overhang issue will persist into 2021 which needs government intervention to
resolve. This is related to specific issues of unsold and unreleased Bumiputera units in Johor, Perak and Kedah besides PRIMA’s unsold units built in unpopular locations. The market activity in 2021 will depend on Covid-19 related government enforced activity restrictions.
The strong support from the banking sector is expected to prevail in 2021 with a balanced 50:50 in terms of the primary versus the secondary market. I expect 2021 will also be a brisk activity year and I totally disagree with the opinions of stock broking analysts who adopt a narrow view of the property market by only seeing the performance of property counters. Developers launch activities in terms if units sold were less than 40% of all units sold in a year. In retrospect, the secondary/ sub-sale markets are the bigger moving segment of the Malaysian property market.
Moving forward, I anticipate 2021 will be a market recovery year. The Work From Home (WFH) culture will continue while the digitalisation of businesses will be key, with business processes being automated.
The repurposing of the usage of commercial buildings/spaces will see the trend of vertical farming and last miles delivery taking place. Logistics, warehousing and data centres will continue to grow while I foresee the residential sector will continue to take the lead.
The property market outlook in 2021 is subject to different sub-sectors but most, if not all, are affected by how fast the Covid-19 pandemic can be brought under control since vaccination may not necessarily be present as a be-all and end-all solution.
In general, industrial and commercial property market performances are directly linked to the success and viability of the businesses which had pivoted in the “New Normal”.
Purpose-built offices and buildings in the corporate real estate scene will be a sector to watch out for as they present opportunities to repurpose these assets for business turnaround since most are looking for a bargain buy or expansion.
As for the residential sub-sector, the buying sentiment would heavily be weighed on the secondary market as change of ownership from the motivated seller to distressed owners will take place due to uncertainty in the economy climate.
Businesses which are already hanging on to dear life to sustain revenues without the support of government of the day will definitely affect livelihood which reduces the holding power of such assets overall.
The retail industry will not be out of the woods. 2021 will still be a challenging year
for many retailers due to VUCA (Volatility, Uncertainty, Complexity and Ambiguity) elements arising from the COVID-19 pandemic crisis.
While many are still adapting to “The New Normal” way of doing business, it is reasonable to expect that more businesses will continue to consolidate and downsize their operations. Many retailers are hoping that the government will revise the Covid-19 Act to protect their businesses during this transition period.
Riskiness is something that actuarists can assess by assigning probabilities to a range of scenarios. So what is certain is that the cost of money, ie. interest rates, is going to be cheap because the central banks are doing Quantitative Easing in a fashion that vastly overshadows what they did for the Lehman and the US mortgage crisis.
With cheap money, the automotive and property sector will be boosted by banks which are chasing for profitable loan portfolios. We already see the automotive sector being supported both by cheap loans as well as a government waiver on sales tax.
The year 2020 remained sluggish in the property sector, notwithstanding some bright
sparks in the residential and industrial segments of the market. We saw high take-up rates in certain primary developments especially landed terrace houses priced below RM800,000 and mid-tiered high rise developments priced below RM600,000. Industrial property meanwhile, seemed to hog the limelight in 2020 with endless rentals and sub-sale transaction changing hands showing that the impact of logistics and e-commerce is real.
Having said that, despite the Home Ownership Campaign (HOC) initiative, and while take-up rates seemed encouraging, the conversion rates remained a struggle for both end buyers and developers.
For high-ticket items, banks were known to slash the margin of financing down to merely 60% for certain projects and especially those within vicinity of KLCC areas.In fact, a few banks won’t even accept applications for big ticket items.
So, to answer the question of “Where are we now?” — moving forward into 2021, the following needs to be looked into urgently before we see any light at the end of the proverbial tunnel. 3 key strategic suggestions to consider:
1. While prudent lending is key to business sustainability, banks must continue to lend to house buyers or investors in the event they qualify for the loan. Banks should look at the overall net worth of customers instead of giving an outright rejection based strictly on their income. If banks refrain from lending further in 2021, we risk a situation whereby the property industry may faced a bleak future, well into 2021.
2. Reinstate the Malaysia My Second Home (MM2H) programme immediately. As it is, foreigners are spoilt with choices of countries to invest in. Our MM2H scheme has always been a “sweetener” when deciding to invest in Malaysia. Like it or not, I am strongly of the opinion that foreigners’ purchase of our properties can spur growth to our property market in the shortest period of time.
3. Political stability is a MUST. We are facing endless flip flop policies and uncertainty with the ruling government over the years, with no end in sight. This instability has shaken investors confidence, especially when it comes to buying property in Malaysia.
So, are we in for a good time in 2021? Sadly, I don’t see any immediate bright news in the property market in 2021 unless all stakeholders concerned arrest the current situation as highlighted above. All hope is not lost though. as prices now are very reasonable. So, go forth and buy your hidden gems now and wait for them to ripen in a few years time from now. That is, if your bankers are hearing you out. Happy Investing!